Cano Health, Inc.
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(Name of Issuer)
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Class A common stock, $0.0001 par value per share
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(Title of Class of Securities)
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13781Y103
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(CUSIP Number)
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(Name, Address and Telephone Number of Person
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Authorized to Receive Notices and Communications)
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April 10, 2023
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(Date of Event which Requires Filing of this Statement)
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CUSIP No. 13781Y103
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Page 2 of 3 Pages
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SCHEDULE 13D
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Item 4. |
Purpose of Transaction.
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Item 7. |
Material to Be Filed as Exhibits.
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CUSIP No. 13781Y103
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Page 3 of 3 Pages
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SCHEDULE 13D
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Dated: April 10, 2023
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Barry Stuart Sternlicht
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By:
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/s/ Michael Racich, Attorney-in-Fact for Barry Stuart Sternlicht
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Barry S. Sternlicht
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1.
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The urgent need for C-suite and boardroom changes at Cano.
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2.
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The path to establishing the right corporate governance and the right, value-enhancing strategy for Cano.
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3.
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How you, as fellow shareholders, can provide feedback to a seemingly insular Board.
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Sustained Shareholder Value Destruction and Underperformance: Cano’s total shareholder returns are a shocking -83%
over the past 12 months and -92.5% since going public in 2021.1 This represents staggering underperformance relative to the S&P 500 Index, S&P Healthcare Sector Index, Russell 2000 and practically every possible peer.
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Reckless Capital Allocation: Cano has burned through all of the roughly $535 million of capital it had on its
balance sheet when its de-SPAC transaction closed in June 2021. In addition, the Company has burned through most of the approximately $1 billion of debt capital raised since then. We believe Dr. Hernandez was able to utilize his outsized
influence over a majority of the Board to push through ill-conceived acquisitions that have significantly underperformed expectations and were predicated on assumptions prepared by or at the direction of Dr. Hernandez that were so
materially incorrect that they did not provide a proper basis for Board consideration and decision-making.
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A Misguided Strategy: Rather than remain focused on the Florida Medicare Advantage market, where there is significant
growth and margin enhancement potential, Cano aggressively expanded to many other states and business lines. This gambit has proved ineffective, as evidenced by Cano’s inability to effectively manage a more sprawling operation, poor
financial forecasting, failure to hit stated guidance and consistently poor results. Now that the public markets are no longer rewarding growth at any cost, we believe the Company needs to divest
unprofitable operations to achieve positive free cash flow as quickly as possible.
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Poor Human Capital Management: Cano has experienced – and continues to experience – concerning turnover and morale
issues. This outflow of talent appears to validate our concerns and signal a lack of confidence in the way Cano is being run under Dr. Hernandez. The Company’s seeming inability to attract and/or retain experienced executives and
directors is a threat to stability and, in turn, long-term value creation.
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Delayed Financials: Cano was unable to file its 10-K on time for both fiscal year 2021 and fiscal year 2022, raising
questions about the Company’s ability to meet public market requirements and eroding Cano’s credibility with investors.
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Insufficient Data Transparency: In our view, the Company has not reported data in a manner that allows public
investors to fully understand the underlying performance of the business. What have been the capital expenditures and operating costs associated with expansion outside of Florida? What is the true profit potential of the Florida Medicare
Advantage business? If presented properly, we believe this data would further support the proposed strategy we summarize below.
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Questionable Conduct on the Part of Dr. Hernandez: We believe Cano needs to clearly address the recent disclosure
involving Dr. Hernandez’s troubling history of share pledging and material loan transactions with Cano executives.
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Dr. Hernandez recently disclosed for the first time in a Schedule 13D amendment that he was materially indebted to the Company’s Chief Operating Officer, Robert Camerlinck, under a previously undisclosed promissory note. To repay this,
Dr. Hernandez, together with other Cano executives, Dr. Richard Aguilar (Chief Clinical Officer), Jason Conger (Chief Growth Officer) and Rick Sanchez, who were named as guarantors, transferred 20,000,000 shares to Mr. Camerlinck on April
5, 2023, pursuant to a loan repayment agreement.
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This raises numerous significant governance issues, including: how could Dr. Hernandez effectively carry out his role of overseeing the C-suite when he was indebted to his own COO? How could this information not have been previously
disclosed to the Board and the market?
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We also question why Dr. Hernandez and the Cano executives who are parties to the April 5th Stock Purchase and Repayment Agreement have not filed a joint Schedule 13D as “group” members.
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A True “Family Affair”: The extent of the Hernandez family’s involvement at Cano is deeply troubling. While Cano’s
shareholders have long suffered from the Company’s underperformance, many of Dr. Hernandez’s family members appear to have benefited from their ongoing relationships with the Company. For example, over the past three years:
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The Company paid more than $23 million to a company controlled by Dr. Hernandez’s father for general contractor work at Cano facilities.
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The Company paid $8.5 million to a dental services provider owned by Dr. Hernandez’s wife, Dental Excellence Partners, for providing dental services for managed care members of the Company.
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Dr. Hernandez’s wife is now a minority shareholder of Onsite Dental which purchased Dental Excellence Partners in April 2022 and provides dental services to Cano. Dr. Hernandez’s wife remains a member of its Board of Directors and Dr.
Hernandez’s brother and mother are employed as dentists at Onsite Dental.
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How can Cano shareholders be sure that these Hernandez family arrangements are negotiated at arm’s-length, at market rates and have been fully disclosed to shareholders?
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Have any senior executives departed the Company since our resignations as directors, or have any given notice that they plan to depart? If so, who are these executives?
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Which senior executives have departed the Company in the past twelve months, and have these departures, if they exist, been disclosed?
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Amid the current tumult, what is Cano’s plan to retain senior talent other than those beholden to Dr. Hernandez through compromising transactions?
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Do any other specific arrangements exist with regard to Dr. Hernandez’s potential pledging of his shares beyond what has been disclosed in his Schedule 13D, Company filings or otherwise?
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What leeway, if any, has the Board granted for pledging of Dr. Hernadez’s stock?
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What loan arrangements exist on Dr. Hernandez’s part, aside from what has already been disclosed, and who are the counterparties? Do any of these violate Board or Company policies?
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What other business arrangements does Dr. Hernandez’s father – or other friends or family members – have with the Company, including marketing involvements?
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Elliot Cooperstone
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Lewis Gold
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Barry Sternlicht
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