Firm Raises $2.5 Million in First Public Stock Sale
Orange County’s newest public company is OptimumCare Corp. of Laguna Niguel, a provider of psychiatric care and drug and alcohol counseling that recently raised $2.5 million through its first sale of stock to the public.
The company sold 1.25 million units at $2 each. The units consist of two shares each of common stock and two stock purchase warrants, which allow owners to purchase more common stock on favorable terms in the future.
The company began trading Dec. 6 on the over-the-counter market and the Philadelphia Stock Exchange under the ticker symbol “OPMCU.” The units will trade until March, at which point the warrants and shares can be traded separately, the company says. Warrants are sometimes tossed into initial public offerings to sweeten the deal.
Company Is Pleased
Since Dec. 6 the units have sold for as much as $2.625 but were trading last week in a range of $2.125 to $2.25. The company said it is pleased with the fledgling stock’s performance.
OptimumCare was founded in 1986 after a handful of western states--including California--repealed laws requiring hospitals to get state approval before expanding or offering new services.
President and Chief Executive Edward A. Johnson, 43, is also aiming at cities and towns in which there is little competition, according to the prospectus accompanying the stock sale.
Johnson was former executive vice president of operations at Irvine’s Comprehensive Care Corp.--operator of the Care Unit drug and alcohol abuse programs--when he left the company 3 years ago.
He said that one of OptimumCare’s strengths is that it’s not capital-intensive; in other words, it doesn’t take a lot of money to get a treatment program up and running.
For a fee, OptimumCare will set up a psychiatric counseling program or drug and alcohol program at hospitals and nursing homes. The hospital provides the beds, nurses, food and billing; the company provides social workers, a psychologist and other professionals.
“We don’t have to build or staff hospitals,” Johnson said. “And in fact, most of our programs only take about five employees to run.”
But investing in OptimumCare is not without risks, the company said in its stock-offering prospectus.
OptimumCare lost $1.1 million from its formation in 1986 through July, 1988. The company last year had to cancel its first treatment program at a Weaverville, Calif., hospital when it couldn’t keep its beds filled with patients and began losing money.
Three other programs were canceled before they even got started because the company couldn’t come up with the capital to get them going. And OptimumCare’s other eight contracts can be canceled if the company can’t attract enough patients. One of the larger ones is at Western Medical Center-Anaheim. Orange County, Johnson acknowledged, “is one of our tougher markets because of the competition.”
On the other hand, OptimumCare has a contract with an Ohio facility that has no competition within a 40-mile radius, Johnson said. That kind of situation is much closer to the company’s original strategy for choosing markets.
But in most markets, competition is stiff from bigger, older and better-established companies. And OptimumCare’s treatment programs don’t differ much from these companies’ programs, according to its prospectus. So the company will have to do intensive advertising to keep its beds filled up.
Johnson said the company is already advertising on cable television in California and will use some of the proceeds of the stock sale to begin advertising on broadcast stations.
The $2.5 million OptimumCare raised when it closed its public offering will yield about $2 million after expenses. The money will be used for marketing and getting new treatment programs started, according to the company.
The company is optimistic about future revenue: Johnson estimated that OptimumCare will take in $4.5 million next year and should turn a profit. By 1990, revenue should hit $7 million, he said.
