Discovery share price down 5.78% in mid afternoon trade

Shares in Discovery were down 5.78% in mid afternoon trade on Monday, the second day of big losses for the financial services company as the market prices in the effects of the recently updated National Health Insurance (NHI) Bill. 

Paul Theron, founder and CEO of Johannesburg-based money manager Vestact, said this was “upsetting and cause for concern”. 

Shares of Discovery fell 8.5% on Thursday to R115.47, its lowest level in a year. The share price was trading at R108.80 at about about 2.40pm. It reached a high of R186 in March 2018.

He said the threat to the medical aid administration posed by the government’s latest healthcare proposals was the reason for the price fall last week.

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Discovery’s shares are down a total 13% since the details of the NHI Bill were made public on Thursday last week, giving the company a market capitalisation of R71.62bn. 

The bill, which was introduced to parliament on Thursday, paves the way for the establishment of an NHI Fund, which will purchase services on behalf of patients from accredited public and private healthcare providers.

“The ANC government's latest brainwave is called the NHI, and if it is ever implemented, will basically nationalise private healthcare in SA,” said Theron. 

“Instead of fixing the state system, which is riddled with corruption, mismanagement and poor medical outcomes, the ANC government seems determined to ruin the part of our healthcare system that works well,”  he said. 

“Remember that the state healthcare system is already expensive by developing country standards and funded by taxpayer contributions.” 

There is some speculation that the drop in Discovery’s share price may have to do with credit providers selling company stock that had been held as security for loans taken by CEO Adrian Gore, said Theron. 

This arrangement would give lenders the right to sell the shares if they fell below a certain point, which may explain movements this week after the initial reaction to the NHI Bill. 

Warwick Bam, analyst at Avior Capital Markets, agreed that the fall in Discovery’s share price was due to uncertainty around the NHI Bill. 

However, Bam said in the long run the actual effect of any NHI legislation on Discovery was “ambiguous”. 

In its existing format, the bill leaves too many questions about what the restrictions will be on private insurers, and whether people will have the ability to choose their medical aid provider. 

gavazam@businesslive.co.za