Very bad news for Medical Properties Trust (MPW) stock price

Medical Properties Trust (NYSE: MPW) stock price will be in the spotlight on Monday as its biggest tenant comes on the verge of collapse. The move, if confirmed, will disrupt the recent recovery of MPW stock as it jumped from $2.83 to $4.87.

Steward Health Care to file for bankruptcy

Medical Properties Trust, the biggest owner of hospital real estate in the United States, will be in focus on Monday. In a report on Sunday, the Wall Street Journal said that Steward Health Care was nearing filing for bankruptcy, as I predicted here.

This is a major event since it will be the biggest hospital bankruptcy in the United States in recent years. It is also the biggest tenant for Medical Properties Trust (MPT), responsible for a third of its revenue.

Most importantly, MPT is one of its biggest owners, holding over 25% of its shares. That means that its shareholding will be wiped out if Steward files for bankruptcy. It also means that the company will likely lose its previous rental dues.

Still, Steward’s bankruptcy could have some benefits for MPT since its client was struggling to pay rent. The bankruptcy will help it to reorganize its finances or even sell its key locations, a move that will benefit its landlord. The challenge for MPT is that the reorganisation and disposals will likely take time. 

Steward has been working to fix its balance sheet for a while. Earlier this year, it raised $60 million in a bridge loan from MPT as it worked to restructure its finances. It has also been selling its hospitals in a bid to raise funds and pay its rent. 

In March, it reached a deal to sell its doctor network to Optum, a company owned by UnitedHealth. It is unclear whether the sale will go on since the Massachusetts Health Policy Commission is reviewing it. The cost of the transaction was not made public too.

Medical Properties Trust stock analysis

MPW chart by TradingView

Turning to the weekly chart, we see that the MPW share price has been in a strong recovery in the past few weeks. It has risen from the year-to-date low of $2.83 to almost $5 today. 

Despite this rebound, the stock has remained below the 50-week and 200-week Exponential Moving Averages (EMA). The Relative Strength Index (RSI) and the Percentage Price Oscillator have also pointed upward.

Therefore, I suspect that the stock will resume the bearish trend as investors react to the Steward Health bankruptcy. If this happens, it will likely fall to the psychological level of $4.

To be clear: there is also a possibility that the stock will continue its recovery since most investors were already expecting Steward to file for bankruptcy.