After reading the thread fully, and my post again, I wanted to post one more time and clarify something. My entire post was from the perspective of a Livongo shareholder. I do not own Teledoc so I didn’t have to decide if I would stay in it or not. I’m honestly not sure what I would do. From a Teledoc perspective I would probably want to know more and wait to take action I guess. From the Livongo side, the merger has set the price. I see no reason to participate further. Even if it falls through that is just more drama to deal with. More uncertainty.
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It is simple: This is a major change to my investment “thesis”. Rarely have I seen such an obvious, massive shift, in one single news release.
Rafe, 10/10. It is simple, and you said it way more simply than I did.
If you were a LVGO owner, this is now NOT the company you invested in.
If you were a TDOC owner, this is now NOT the company you invested in.
This is something else, and you don’t know what their growth will be like, what their future will look like, how the market will value them. You are speculating.
That’s why it’s a sell.
Bear
PS - This will be my last post on this. I hope we can all wind it down.
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I generally don’t agree with some of the reasons I’ve seen opposing this deal, with some reasons bordering on emotional rather than rational. I’ve been in since $17 last year and have studied LVGO extensively, but my counter-points are focused on the deal, not the company. So I’m going to lay out my rational for at least holding for a few days:
10% premium is too low: Ok, everyone and their grandmother knew that LVGO had a stretched valuation. Last Tuesday, the price was $111 and then, 5 business days later, proceeded to hit a high of $150 yesterday! The 10% premium argument is about perspective, and both companies most likely agreed that $150 was not LVGO’s fair value. If you compared merger price to even last week’s $111, the premium approaches 50%. Now I don’t know what they decided the fair value of Livongo was, but I’d like to believe they agreed it was in the low-$100s. If this deal was announced with the same price last Tuesday, we would’ve been generally happy. I’m good with the price.
Management “giving up” while they’re doing so well: I disagree with this reasoning, mainly because I view this as a “goal of helping people trumps independence” merger. In other words, even if your company is doing extremely well financially, if your vision is to cure/manage the most pressing chronic conditions and someone gives you the opportunity to accelerate it, why wouldn’t you take it if you actually believe in managing chronic conditions? My example is Instagram and Facebook. Instagram was well on their way to being a social media powerhouse, growing something like 1700% week-over-week, but they agreed to be acquired by Facebook because 1) FB had the resources to get them to where they wanted to go WAYYY quicker and 2) Facebook would’ve competed with them if they said no, which would’ve been a bloodbath.
Given that Livongo had a much more altruist vision than Instagram, it makes sense that they’ll do whatever it takes to help people . TDOC also saw that the market for applied health management was ripe with opportunity, so they were either going to build or acquire. Rather than fight at the expense of the people Livongo was trying to help, wouldn’t it be easier to take TDOC’s tremendous resources and client base and reach your goal faster, assuming your goal is to help people?
TDOC’s management concerns: Fair point. It’s subjective, so no argument from me.
Investment thesis has changed and has created confusion: Yes, the these has changed dramatically! As Bear said, this is not the company I invested in, but that is true for literally every merger and acquisition. Speculation is defined by how unclear you are about the companies prospects. No, I don’t know what growth will be like, but unless TDOC’s management decides to go absolutely insane, I can’t see a possible reason why growth would be worse than their blended average. This is a very different company, but the opportunity for TDOC and LVGO to completely dominate not just applied health management, but the ENTIRETY of telemedicine excites me.
My money can be better utilized in another stock: Another fair point. For people new to this board, I think its important to point out that when Saul and others leave a stock, they don’t necessarily expect it to go down, they just think other companies are going to do better. Prime examples are Shopify and Twilio. If I recall correctly, Saul exited Shopify in the $200 or $300’s, while he exited Twilio at ~$100. Well, both have gone on to have tremendous returns, but the stocks he left SHOP and TWLO for have done even better. The stocks that are “abandoned” on this board can still do extremely well and beat the market by a large margin, but your allocation depends on how aggressive you want to be.
There are probably other points that I disagreed or agreed with, but I don’t remember them at the moment. I’m definitely in a holding pattern until I learn more, but I see this merger as a positive. A TDOC/LVGO company is going to be an undisputed powerhouse in telemedicine and will be firmly in-charge of the industry’s penetration in our everyday lives. That’s what I invest in, companies that have enough power and influence to dictate where their industry goes, and this industry happens to be a medium-to-long term behemoth. I’ll probably trim a bit because I don’t want 15% of my portfolio in TDOC, but this is still a long-term hold.
CloudAtlas
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If I recall correctly, Saul exited Shopify in the $200 or $300’s, while he exited Twilio at ~$100. Well, both have gone on to have tremendous returns, but the stocks he left SHOP and TWLO for have done even better.
Your comment caused me to check back. SHOP is now $1,094. Saul sold 3/4 of his SHOP position by the end of July 2018. SHOP closed on 7/31/18 at $138; I didn’t check to see when he sold the remaining 1/4. But from 7/31/18 that is a gain of about 693%. I’m not sure how many SaaS stocks have matched that performance. AYX is up about 360% and DDOG is up about 348% since that date. I hold Saul in very high regard, but no one should doubt that in hindsight it would have been better to stay in SHOP rather than sell in July 2018.
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LVGO was my largest holding before today. It is now in solid second. The below quote is the focus of my decision, which I’ll break down after:
"My money can be better utilized in another stock: Another fair point. For people new to this board, I think its important to point out that when Saul and others leave a stock, they don’t necessarily expect it to go down, they just think other companies are going to do better. Prime examples are Shopify and Twilio. If I recall correctly, Saul exited Shopify in the $200 or $300’s, while he exited Twilio at ~$100. Well, both have gone on to have tremendous returns, but the stocks he left SHOP and TWLO for have done even better. The stocks that are “abandoned” on this board can still do extremely well and beat the market by a large margin, but your allocation depends on how aggressive you want to be."
There are a host of earnings reports coming up in short order. My allocation to LVGO is now in question as no news is likely to drive the price (except digesting the news we already know).
However, this is NOT the case for several other companies that are due to report:
I’m looking at you: DDOG, ZM, and CRWD.
By trimming the position in LVGO and putting it in 3rd tier allocations, I can free up significant funds to place an additional conviction to ZM and DDOG.
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