Brazilian asset manager Squadra Investimentos described its bet on shares of health insurer Hapvida as the biggest investment mistake in its history, according to a letter sent to fund shareholders on Tuesday and reported by outlets including Valor Econômico, NeoFeed and Estadão. The firm, known for activist positions in Brazil's stock market, also said it had cut its stake in the healthcare operator.
According to NeoFeed, Squadra trimmed its Hapvida holding by about 1.3 percentage points, bringing its stake to 3.87%. The cut comes just months after the firm won election of three board members at the company following a public push for governance changes. Other outlets, including InfoMoney and the site Analistas LTDA, reported that Squadra's position in Hapvida had fallen to around 1%, suggesting further selling in the days that followed the initial reduction.
In the letter to shareholders, a portion of which was reproduced by the site BP Money, Squadra acknowledged the toll the investment took on its results. "It scratched our performance track record and cost our investors' capital dearly," the firm said, according to the outlet.
A governance campaign
Squadra had been pushing for months for changes on Hapvida's board and management. In an earlier letter to the company, the firm went as far as describing the stock's decline as one of the biggest value destructions in the history of Brazil's stock exchange, according to Folha de Pernambuco. That campaign culminated in the election of three Squadra-backed board members, a win that, months later, did not stop the firm from acknowledging its investment thesis had failed.
Hapvida shares (HAPV3) fell as much as 4.7% on Tuesday, according to Reuters, amid the fallout from Squadra's letter. The stock is down 56.9% for the year, pulling Hapvida's market value to roughly 3.16 billion reais (about 600 million dollars), according to NeoFeed. For readers unfamiliar with the Brazilian market, Hapvida is one of the country's largest health insurance and hospital network operators, serving millions of beneficiaries across Brazil.
After admitting the mistake, Squadra redirected part of its portfolio. According to the site Seu Dinheiro and Analistas LTDA, the firm placed Brazilian depositary receipts of MercadoLibre (MELI34) and Nubank (ROXO34) among its biggest bets, alongside positions in utility companies such as Equatorial and Energisa and in oil producer PRIO.