Zynex Inc. (ZYXI)

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ZYXI short report:

We are short $ZYXI.

We believe $ZYXI core business - reselling generic 9-volt batteries and electrodes - is worthless and grossly misunderstood by retail investors and sell-side analysts

Retail investors have been drawn in by a growth story, unaware of the huge risks in $ZYXI business model. Actively-managed institutional ownership remains negligible - no institution, actively managed money or not, has owned more than 5% of shares since 2011


In reality $ZYXI is a parasitic business gouging insurers (and consumers), acting under the pretense of helping in the fight against the opioid epidemic. In fact we see similarities to Philidor in Zynex’s minimal R&D, monthly prescription auto-renewals, and routine copay waivers

We see cracks in the critical piece of $ZYXI's abuse of our healthcare system: abnormally high reimbursements. Gross margins fell below 80% for the first time since Q1 17 due to lower reimbursement from commercial payors. And revenue per order is down ~30% in the last two years

We find $ZYXI routinely waives deductibles and copays, a practice which is considered fraud by Medicare and which likely violates insurance law pertaining to commercial payors constituting breach of contract

We have been in contact with commercial and government investigators examining $ZYXI claims, including the Department of Insurance of large state investigating after an insurance company reported Zynex’s billing

Analysts mistake $ZYXI as a Medical Technology company. It’s actually a Durable Medical Equipment supplier - appropriate multiples would value the stock >80% lower even before accounting for risks we highlight.

The set-up for $ZYXI shares is increasingly precarious, up ~180% year to date vs the Health Care Select SPDR ETF $XLV at -2%. Last night’s news of Zynex addition to S&P 600 only exacerbates the mispricing.


https://seekingalpha.com/article/4352747-zynex-deteriorating-fundamentals-and-signs-of-reimbursement-pressure