Activist Investor Demands Action from Acadia Healthcare’s Leadership

Acadia Healthcare Co. Inc. (Nasdaq: ACHC) is facing pressure from an activist investor who has called for a range of changes at the company.

New York City-based Engine Capital published its letter to the Acadia Healthcare board of directors on Wednesday, calling out the company’s perceived missteps and proposing a handful of reforms that it says would unlock “a tremendous amount of shareholder value.” Acadia responded to the letter from Engine Capital, which holds 3% of the company’s shares, but did not spell out what it would do, if anything, in response.

“We believe the company’s undervaluation and sustained negative returns are due to ineffective execution, a bloated corporate structure, poor decision-making, a revolving management team under CEO Christopher Hunter, a lack of behavioral health experience among executives and directors, a poorly designed compensation framework, and a culture that has emphasized ‘growth at any cost,’” the letter states. “Fortunately, we see clear opportunities to turn around the business and significantly increase shareholder value.”

The company has been hit with several bouts of bad news regarding alleged harm in its facilities and its handling of its largest-in-the-industry position within behavioral health. The company is under investigation by law enforcement, regulatory and political entities.

This, along with other factors, has led to a steep decline in Acadia Healthcare’s share price. At the time of writing this article, Acadia’s share price is down approximately 41% year-to-date and 69% year-over-year.

Acadia Healthcare released a statement, apparently in response to the public letter from Engine Capital, that states that the board “regularly evaluates all opportunities to achieve” value for “all shareholders.” It also disclosed that the financial giants Goldman Sachs and J.P. Morgan are acting as financial advisors to the company. It also disclosed that Kirkland & Ellis LLP is the company’s legal advisor. All three are titans of their respective industries. Filings with the SEC show that both Goldman Sachs and J.P. Morgan are involved in the company’s credit and debt financing. 

A representative of the company declined to share more information about the present direction of the company.

The letter, in part, calls for Acadia Healthcare “to stop allocating growth capital while the dust settles on new regulations and reimbursement rates for the industry.”

In its latest earnings call, Acadia Healthcare reported that some of its expansion projects were ahead of schedule. That contributed to higher-than-expected costs in the first half of the year. Executives on the call said that this was, in effect, future costs being pulled into the present and would not be reflected in future reports. The executives also said Acadia Healthcare was considering slowing its multi-pronged effort to double its revenue by 2028.

The Engine Capital letter also calls for Acadia Healthcare to rework its leadership to focus on regions rather than service lines, as it did in the past. In 2022, according to the letter, Hunter reworked the leadership structure according to service lines after his arrival as CEO that same year.

“Health care is an inherently local business, where each region has different regulatory considerations, insurance players, provider networks and pricing dynamics,” the letter states. “It is also logistically much harder to supervise and visit facilities across the nation instead of within a region. As a result of this shift, geographical market knowledge has been lost, individual sites are not getting enough attention from experienced leaders and operational execution has deteriorated across the board.”

Engine Capital also calls for the Acadia Healthcare leadership structure to be flattened, for executives to be hired who have behavioral health experience, and for leaders to be incentivized to drive “cross-referrals within Acadia’s network” as part of their incentive package.

It also proposes the sale of the company’s comprehensive treatment center service line and other groupings of assets, saying “there is a large arbitrage opportunity between the private market value of Acadia’s portfolio and the Company’s current trading price.”

The comprehensive treatment center service line accounted for about 17% of the company’s revenue in the first half of 2025. This service line is its outpatient addiction treatment offering. Specifically, it focuses on medication-assisted treatment (MAT) for opioid use disorder.

Engine Capital also wants Acadia Healthcare’s leadership to consider selling underperforming or geographically isolated assets; new facilities that “could fetch high multiples”; and its owned real estate through sale-leaseback agreements.

The letter does not mentionthe scrutiny the company faces.

During the second-quarter earnings call, executives also acknowledged that the mounting legal costs have not yet resulted in any settlements of the several probes the company is facing. In the first half of the year, legal fees totaled $84.5 million.

The Criminal Division of the U.S. Department of Justice is leading “the efforts from a number of federal agencies and departments” looking into the company’s practices. It is also under review by the U.S Securities and Exchange Commission and by several members of Congress, according to its second-quarter financial statements. 

Engine Capital also wants improvements in cash flow and earnings to be directed toward share buybacks, rather than paying down the company’s debt and to consider selling assets to return capital directly to shareholders.