InMode Ltd.: A Shareholder Standoff Over Cash, Leadership, and Value

The battle between InMode Ltd. (NYSE: INMD) and its activist investor DOMA Perpetual Capital Management LLC has escalated into a high-stakes clash over corporate governance, capital allocation, and leadership effectiveness. At its core, the dispute hinges on whether InMode’s $640 million cash hoard should be returned to shareholders through aggressive buybacks—or held as strategic ammunition for future acquisitions. With InMode’s stock down 22% year-to-date and trading at a P/E ratio of 6.11, DOMA argues the company is failing to unlock shareholder value. InMode, however, defends its conservative approach, citing regulatory risks and growth opportunities. The outcome could reshape the trajectory of this medical aesthetics leader.

DOMA’s Case: A Call for Immediate Action

DOMA Perpetual, which owns a significant stake in InMode, has made its demands clear: resume and accelerate share repurchases. The firm points to stark financial realities:
- InMode’s market cap (excluding cash) is just $375 million, while its free cash flow exceeds $100 million annually.
- The company’s 80% gross margins and $640 million in cash (with zero debt) suggest it’s undervalued by the market.
- DOMA insists the stock’s depressed valuation—6.11x earnings—is a buying opportunity for long-term investors.

The firm’s proposed solution is aggressive: a 30% tender offer and a 10% buyback in 2025, which would sharply reduce its cash reserves to under $100 million. DOMA argues that retaining such a large cash pile is irrational when the stock trades at a fraction of its intrinsic value.

But DOMA’s critique extends beyond capital allocation. It directly blames CEO Moshe Mizrahy for the stock’s decline, citing:
- Leadership missteps, including the abrupt firing of the U.S. sales head, which left the position vacant and sales teams reporting directly to Mizrahy.
- Resistance to operational changes, such as relocating production out of Israel to mitigate geopolitical risks and reduce costs.

InMode’s Defense: Prudence Over Panic

InMode’s board has pushed back against DOMA’s demands, framing its cash preservation as a strategic necessity. Key points include:
1. Buybacks Already Delivered: The company has returned $500 million to shareholders via buybacks since 2022, reducing the share count by nearly 30%. It continues to buy back 10% of shares annually.
2. M&A Opportunities: InMode emphasizes its focus on acquisitions to fuel growth, citing recent patent purchases from Viveve and the University of California. A cash-rich balance sheet (current ratio: 8.73) ensures flexibility for deals.
3. Production in Israel: Mizrahy defends domestic manufacturing, noting FDA and CE regulatory compliance, as well as supply-chain efficiency. Moving operations abroad, he argues, would risk disruptions and add costs.

On valuation, InMode rejects DOMA’s claims, stating its conservative guidance and cash-first strategy reflect prudent risk management in a volatile market.

The Numbers Tell the Story

To assess this standoff, let’s dissect the data:

The chart reveals a stock down over 22% year-to-date, aligning with DOMA’s valuation argument. Yet InMode’s balance sheet remains robust:
- Free Cash Flow (2025E): $150 million
- Cash/Market Cap Ratio: ~60%
- P/E Ratio: 6.11 (vs. industry averages of ~20-30x for growth-oriented medtech firms)

This stark undervaluation fuels DOMA’s urgency, but InMode’s focus on liquidity for M&A complicates matters.

Analysts and the Market: Mixed Signals

Analysts are divided:
- Canaccord Genuity: Lowered its price target to $15 (Hold), citing macroeconomic headwinds.
- Jefferies: Upgraded to Buy, citing InMode’s “underappreciated pipeline” and long-term potential.
- BTIG: Downgraded to Neutral, warning of revenue risks in a contracting medical aesthetics market.

Legal wins, such as a court ruling against counterfeiters on DHGate, reinforce InMode’s brand strength. Still, the company faces headwinds: global economic uncertainty and slowing demand in aesthetics procedures could pressure guidance.

Conclusion: A High-Reward, High-Risk Gamble

Investors must weigh two competing visions:
1. DOMA’s Case for Buybacks: With InMode trading at 6.11x earnings and generating $150 million in annual free cash flow, returning cash to shareholders could catalyze a valuation rebound. The stock’s 22% decline year-to-date suggests significant downside protection.
2. InMode’s Conservative Play: Retaining liquidity for M&A offers growth potential, but the company’s inability to reverse its stock’s slide raises questions about management’s effectiveness.

The board’s decision will likely determine InMode’s fate in 2025. If it greenlights a tender offer or accelerated buybacks, the stock could rally sharply, rewarding long-term holders. If it doubles down on cash preservation, the undervaluation may persist, inviting further activism.

For now, InMode’s fundamentals—strong margins, robust cash flow, and a leadership in non-invasive aesthetics—suggest the company is undervalued. However, the path to unlocking that value hinges on resolving the governance clash. Investors seeking a contrarian play may find upside here, but patience will be required to see the conflict through to resolution.