SGRY · Surgery Partners
Conviction · Low · more likely to lag the S&P 500 over the next three months
Wrong if: a daily close above $29.33
Note written ·
Price against the kill line
8.1% clear of its kill line on the 13 November 2026 close.
How to read this
This note expects the shares to lag the market, so its kill line sits above the price: a close above the red mark would prove the view wrong. Prices run from low on the left to high on the right. The dot is where the stock closed on 13 November 2026, left of the mark while it is below the line; a dot right of the mark has closed through it.
The scale is stretched near the line, so close calls are easy to see. More than 8% from the line, the stock reads well clear, with a hollow dot to show the figure is off the drawn scale.
The kill line is the research note's own test. The portfolio sells on business facts, not on a price. How the portfolio decides
Three months against the kill line
Daily closes, to . Red: the kill line, a daily close above $29.33, on record since 11 November 2026. The shares are up 87.7% since the close; the S&P 500 is down 2.1% over the same sessions. Figures in the note can cover a different window.
Kill line
A daily close above $29.33, about 10% over the 11 November 2026 close and above the $28.00 rival bid, which would show the shares leading the S&P 500; a signed merger agreement above $26.61 per share would also prove the call wrong.
Research onlyNot in the portfolio.
Catalyst
Key figures from the filings · Health Care
Quarter to 30 September 2026, filed 9 November 2026; valuation at the 13 November 2026 close
- Revenue, latest quarter ($M)
- 815
- Revenue, change on a year (%)
- −0.8
- Operating margin (%)
- 10.5
- Free cash flow, four quarters ($M)
- 203
- Net cash, cash less debt ($M)
- −2,701
- Enterprise value to sales (×)
- 1.9
- Enterprise value to operating income (×)
- 17.1
- Free-cash-flow yield (%)
- 5.7
All filed numbers
What Surgery Partners reports to the SEC in its quarterly and annual filings. Each group states its period and filing date once; a figure dated otherwise says so. Built from the filings known on .
| Quarter to | Revenue ($M) | On a year (%) | Operating margin (%) |
|---|---|---|---|
| first filed | 815 | −0.8 | 10.5 |
| first filed | 849 | +2.7 | 12.0 |
| first filed | 811 | +4.5 | 8.1 |
| first filed | 885 | +2.4 | 12.5 |
| first filed | 822 | +6.6 | 12.9 |
| first filed | 826 | +8.4 | 13.5 |
| Pre-tax income ($M) | Not reported |
| Net income ($M) four quarters: −87.0 | −21.1 |
| Diluted shares, change on a year (%) against the quarter to 30 September 2025 | +1.3 |
| Operating cash flow ($M) | 278 |
| Capital spending ($M) | 75.1 |
| Free cash flow ($M) | 203 |
| Cash and short-term investments ($M) | 355 |
| Debt ($M) long-term debt and finance leases | 3,055 |
| Net cash, cash less debt ($M) | −2,701 |
| Deferred revenue ($M) | Not reported |
| Backlog, orders not yet delivered ($M) | Not reported |
| Receivables ($M) | 468 |
| Inventory ($M) | 77.5 |
| Shareholders' equity ($M) | 1,665 |
| Market value ($M) | 3,527 |
| Enterprise value, market value plus net debt ($M) | 6,228 |
| Enterprise value to sales (×) | 1.9 |
| Enterprise value to operating income (×) | 17.1 |
| Price to earnings (×) | Not meaningful |
| Price to book value (×) | 2.1 |
| Free-cash-flow yield (%) | 5.7 |
Short interest (FINRA, settled 15 October 2026, published 26 October 2026): 10.9% of shares outstanding sold short, 10.3 days of average trading to cover, −0.1% since the previous report.
| Window | Bought | Sold |
|---|---|---|
| 90 daysfrom | $144K | $0 |
| 12 monthsfrom | $144K | $1.3M |
The thesis
Surgery Partners' shares are more likely to lag the S&P 500 over the next three months. The price already sits above the $25.00 cash that HealthSpan Partners' signed deal pays, so the remaining upside depends on a rival bid that the board has rejected. Whether that bidder, reported by Bloomberg to be UnitedHealth Group at $28.00, comes back with a binding offer decides the case.
The shares closed at $26.58 on 12 November 2026. That is $1.58 above the amended $25.00 HealthSpan price and just under the $26.61 most that holders could receive if the deal runs to its 23 October 2027 outside date with the full ticking fee. If the rival bid fades, the shares have room to fall back toward $25.00. If the contest continues, the gain to $28.00 is about 5% from the 12 November 2026 close.
The rating is Low because the shares price in more than the signed deal pays before 1 March 2027, and the only route above it runs through a bid the special committee unanimously found not to be a "Superior Proposal" on 9 November 2026. The analysts who updated after the 9 November 2026 report all set their targets at the $25.00 deal price.
Bullish and bearish views on Surgery Partners, Inc.
The bull case on Surgery Partners, Inc. (SGRY), in brief: a higher bid already exists. The bear case: the board backs the lower offer.
Bull case
- A higher bid already exists. The company's 9 November 2026 filings show an unsolicited third party proposed $28.00 per share in cash on 8 November 2026, after a first approach on 3 November 2026. That is $3.00 above the signed HealthSpan price.
- Minority holders control the vote. Approval requires a majority of votes cast by disinterested shareholders, according to the company's 26 October 2026 merger filings. The roughly 39% stake held by Bain Capital affiliates does not count toward that test.
- The buyer has already raised once. HealthSpan, an affiliate of Bon Secours Mercy Health, raised its price to $25.00 from $23.50 on 9 November 2026, 14 days after signing. The company puts the amended deal at up to about $6.0 billion including debt.
- A ticking fee pays for delay. If holders approve but the deal has not closed by 1 March 2027, non-Bain holders accrue 10% a year on $25.00, capped at $1.61, for a maximum of $26.61, per the 9 November 2026 press release.
- Profit per share rose. Third-quarter adjusted earnings were $0.16 per share against a $0.12 estimate and $0.13 a year earlier, Benzinga reported on 9 November 2026.
Bear case
- The board backs the lower offer. The special committee reaffirmed its recommendation of the $25.00 HealthSpan merger on 9 November 2026. It cited a materially longer path to closing, greater regulatory risk and missing contractual protections in the $28.00 proposal.
- Antitrust risk weighs on the rival. News reports on 10 November 2026, including Becker's Hospital Review, noted that UnitedHealth's Optum unit already owns a large surgery-center network. UnitedHealth declined to comment on the Bloomberg report.
- Analysts anchor at $25.00. RBC Capital raised its target to $25 on 10 November 2026 with a Sector Perform rating. TD Cowen raised its target to $25 with a Hold on 11 November 2026, and Mizuho cut its rating to Neutral from Outperform with a $25 target the same day.
- Breaking the deal costs more. The amendment raised the termination fee owed to HealthSpan in specified circumstances to about $149.1 million from $108,986,842, according to the company's 9 November 2026 filings.
- Bain is committed to HealthSpan. Bain affiliates signed a voting and support agreement for the HealthSpan merger and will roll their shares into the buyer, per the 26 October 2026 filings.
- The standalone business is soft. Third-quarter revenue was $815.3 million against $821.5 million a year earlier, per the 10-Q filed 9 November 2026, and below the $825.6 million estimate Benzinga cited. The company withdrew guidance and held no earnings call.
Price setup
The shares closed at $23.20 on 6 November 2026 and jumped to $26.45 on 9 November 2026, the day both bids became public. They then held in a narrow range: $26.73 on 10 November 2026, $26.66 on 11 November 2026 and $26.58 on 12 November 2026. The 52-week intraday high is $27.23, set on 9 November 2026, and the last close is 2.4% below it.
The shares are up 76.8% over three months from the $15.03 close of 14 August 2026. The 50-day moving average is $17.04 and the 200-day is $15.03 as of 12 November 2026; both are far below the price because the deal reset the stock in one step, so neither says much about the next move. The 52-week closing low was $11.49 on 27 March 2026.
Four deal prices set the levels that matter: $23.50 (the original offer), $25.00 (the amended offer), $26.61 (the amended offer plus the full ticking fee) and $28.00 (the rival bid). Since 9 November 2026 the shares have sat close to $26.61, which prices in either a long, fee-earning delay or some chance of a higher bid. A director, Teresa DeLuca, bought 10,000 shares at $14.35 on 18 August 2026, according to her SEC Form 4, before any deal was announced.
Catalysts ahead
- ~30 November 2026 (est.): Preliminary proxy statement and Schedule 13E-3 filing. Discloses the sale process, the rival bidder's terms and the fairness opinions, which shape whether disinterested holders accept $25.00.
- 1 March 2027: Ticking-fee start date if holders have approved but the deal has not closed. From this date, non-Bain holders accrue 10% a year on $25.00, up to $26.61 in total, which supports the price during a regulatory delay.
- ~31 March 2027 (est.): Expected closing of the HealthSpan merger, first quarter of 2027. Completion pays $25.00 in cash plus any accrued ticking fee and ends public trading; a signed higher rival deal would replace it.
What would change the view
A daily close above $29.33, about 10% over the 11 November 2026 close and above the $28.00 rival bid, which would show the shares leading the S&P 500; a signed merger agreement above $26.61 per share would also prove the call wrong.
What it trades with
The shares trade on deal events rather than on hospital and surgical-services stocks or the S&P 500. Their main outside link is the rival bidder: news on UnitedHealth's acquisition appetite, its balance sheet or antitrust scrutiny of Optum bears directly on whether the $28.00 proposal survives.
The other merger and special-situation names in the group, such as SLN, ULBI, BRZE and EVGO, move on their own transactions. Surgery Partners' 9 November 2026 move came from its own bidding contest, so the group's direction carries little weight for it.
The evidence, claim by claim (8)
- HealthSpan Partners raised its cash price for Surgery Partners to $25.00 per share from $23.50, an enterprise value of up to about $6.0 billion; closing is still expected in the first quarter of 2027. Surgery Partners press release, Form 8-K exhibit 99.1 · as of
- An unsolicited third-party proposal received on 3 November 2026 was updated to $28.00 per share in cash on 8 November 2026; the special committee unanimously found it not a Superior Proposal, citing timing, regulatory risk and missing contractual protections. Surgery Partners press release, Form 8-K exhibit 99.1 · as of
- Bloomberg reported that UnitedHealth Group made the $28.00-per-share bid, citing a person familiar with the matter; UnitedHealth declined to comment. Bloomberg · as of
- Non-Bain holders accrue a ticking fee of 10% a year on $25.00 if approval is obtained but the deal has not closed by 1 March 2027, capped at $1.61 for a maximum of $26.61 at the 23 October 2027 outside date. Surgery Partners press release, Form 8-K exhibit 99.1 · as of
- The amended merger agreement raises the company termination fee to about $149.1 million from $108,986,842. Surgery Partners Form 8-K and DEFA14A filings · as of
- Third-quarter 2026 revenue was $815.3 million against $821.5 million a year earlier; adjusted EPS was $0.16 against a $0.12 estimate. Surgery Partners Q3 2026 10-Q and results release · as of
- RBC Capital (10 November 2026) and TD Cowen (11 November 2026) raised price targets to $25; Mizuho downgraded the shares to Neutral from Outperform with a $25 target on 11 November 2026. Benzinga and fiscal.ai analyst reports · as of
- Director Teresa DeLuca bought 10,000 shares in the open market at $14.35 on 18 August 2026. SEC Form 4 filed 19 August 2026 · as of
Sources
- Surgery Partners, Inc. - Form 8-K - FY2026 · sec.gov
- Surgery Partners Is Said to Have Rejected UnitedHealth Bid · bloomberg.com ·
- HealthSpan Partners ups Surgery Partners offer to $6B after rival bid · healthcaredive.com
- Surgery Partners rejected UnitedHealth's $28-a-share bid: Bloomberg · beckershospitalreview.com
- Surgery Partners, Inc. - Form DEFA14A - FY2026 · sec.gov
- Surgery Partners, Inc. - Form 8-K - FY2026 · sec.gov
- Surgery Partners, Inc. - Form 8-K - FY2026 · sec.gov
- SGRY Shareholder Notice: Surgery Partners $23.50 per Share Merger Under Investigation on Behalf of Shareholders · prnewswire.com
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