Earlier this week, Enhabit Inc. (NYSE: EHAB) stock tumbled after the company entered into a limited waiver agreement with Wells Fargo Bank (NYSE: WFC).

“As we work with our advisors and prospective strategic partners as part of our Strategic Review, out of an abundance of caution we chose to proactively reach out to our bank group to ensure we remain in compliance with our financial covenants,” Enhabit CEO Barb Jacobsmeyer said in a statement Tuesday, explaining the move. “At this time, the company believes it has adequate liquidity. The company has not drawn on its revolving credit facility in 2023. As of Sept. 30, the company had total available liquidity of approximately $80 million, including cash and cash equivalents.”

The Dallas-based Enhabit has 255 home health locations and 108 hospice locations across 34 states.

After stock fell to an all-time low, close to $8 per share, Arex Capital Management – which owns about 4.7% of the company’s common shares – wrote an open letter Thursday criticizing Enhabit’s communication and urging a sale.

A New York-based hedge fund, AREX Capital first wrote an open letter to Enhabit’s board back in June, one that suggested the company should explore a sale. In August, Enhabit officially launched a strategic review process.

“We strongly emphasize to the board that there should be absolutely no question that the highest bid received in a full and fair auction is Enhabit’s fair value,” Arex Capital Wrote in its second open letter Thursday. “A sale of the company is the only acceptable outcome for this process.”

The hedge fund also added that it “will act decisively to protect our rights if the company has not announced a sale by early next year.”

Encompass Health Corporation (NYSE: EHC) spun off Enhabit into its own public company in June of last year. Since then, it has struggled, due to staffing woes and Medicare Advantage (MA) penetration.

It began trading at $24 per share in June of 2022. At market close Thursday, its stock price sat at $8.38.

“Poor communications have again caused unnecessary and substantial harm to Enhabit’s shareholders,” AREX Capital wrote. “Somehow, the company took the simple act of proactively attempting to streamline their strategic alternatives review process and created confusion for investors – with the company’s initial 8-K on Monday failing to even mention the process! Last night’s clarification was better, but shouldn’t have been necessary.”

Enhabit did, indeed, file an 8-K filing Monday before releasing a clarifying statement on the details around the limited waiver agreement on Tuesday.

“Monday’s disclosure also needlessly implied that Enhabit’s lenders had slashed their Revolving Credit Facility commitments, an error that was repeated by several sell-side analysts,” AREX Capital wrote. “This inference is simply wrong. There was, in fact, no change at all to lenders’ permanent commitments or to the overall facility size, and there was virtually no change to the company’s effective revolver limit, which stood at $239 million on June 30 and now stands at $230 million.”

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