Looks like the Street really hates this deal, LVGO down 12% and TDOC almost 20%… Holding on to my shares but not sure what to think of this.
Paul
(long TDOC and LVGO)
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One other thing to consider is that this is going to distract each company from what they were doing. There will be integrations teams created and can be pretty distracting. I think both companies will be devoting significant time to integrating their products which will distract them from improving their products. While it may be long term positive if they are able to integrate well like Coupa seems to do with their acquisitions I am on the fence going forward due to the additional risks and distractions. Today seems a pretty bad reaction from the market and hoping in the next few days it does come back at which time I may get out. Do not see today’s news as being worth the kind of drop we are seeing today but definitely not positive for going forward
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Could not agree more Saul. The company is going great guns and growing at breakneck speed and now this? +10% and so little in cash? It does not make sense becasue something is very wrong.
Now, I can speculate but I will not know what it is so I got out this morning. Simply because I dont want months of uncertainty re deal and management jostling for positiion rather than focus on the customers.
As to the fall today it was still up 25% from last week so I ask for no sympaties :). Thanks to this board who put me onto this investment 6 months ago…
Nik
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The merger creates a pretty strong combined company. They can now bundle all services together when talking to insurance companies. It makes it that much harder for any competitors to compete with either of them. Each was the undisputed leader in their field - put 2 gorillas together and you get King Kong.
I have always thought TDOC was the most likely to develop a competing product to LVGO. This now takes the most likely competitor out of the picture. Who is going to compete with them now? No insurance company is going to do it because no other competing insurance company would buy their product. DXCM? They might have tried to make a diabetes competitor to LVGO, but it’s not really their core competency - and they don’t have any experience to develop all the other services the combined company can offer. In a year or 2 this could look like a genius move.
Short term the stocks will probably come down, but I see this as a long term winner.
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Totally agree with Saul on this one. I struggle to understand why a company that is growing at the rate lvgo is need to MERGE with anyone when they claimed all along that they are perfectly positioned to take advantage of the opportunity. Imagine how hard it must be to manage an organization that doubles revenue every year. Now imagine how hard it will be to do that and integrate two totally different companies. Total waste of energy, massive distraction. If somebody like Aetna was buying them at double the price, now that maybe may make sense. Merger? what a joke.
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Perhaps the management of the company simply felt they were being overvalued by the market and that they could never live up to investor expectations at >30x sales? They wouldn’t be the only management in this market worrying their stock may be flat for a long time.
Sometimes the simplest explanation is the easiest.
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Sometimes the simplest explanation is the truth I meant to say 
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Lots of questions around why would LVGO sell out if things were so great.
Why were things so great? Because they have virtually no competition right now.
What would happen if they did not sell out? I assume TDOC in one way or another let them know that TDOC WAS GOING to get into this space. So, if LVGO did not sell out then they would eventually be competing against TDOC. So, they can sell out now at a very good price, or they could decide to directly compete against TDOC which would probably have impacted their share price anyway. IMO all it would take would be a PR announcement from TDOC stating that they were launching a program to get into this space and LVGO shares would have come way down. Or, TDOC would have acquired a smaller competitor of LVGO to speed things up. In either case, LVGO shares would have come down.
As I said before, I see this as being very similar to the situation between WORK and MSFT. WORK decided to go it alone, and that worked for some amount of time, but it doesn’t look like it’s working so great anymore.
Yes, it is slightly unfair and disappointing to those who wish LVGO had stayed independent, but as we have said on this board before they don’t really have any proprietary technology. Anyone could copy what they have done. So, it was the best decision they could make to sell.
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Even worse, this negotiation has been going on for six weeks, and for all six weeks Livongo knew they were having huge revenue growth. Why did they even enter into the negotiations???
Would Crowdstrike, or Fastly, or Datadog, or Zoom, knowing that their business was growing at over 120%, enter into negotiations to be bought out??? Stop and think about that!
The only answer I have to that is that the stock price had already run up sooooo much that an additional 10% premium may have been good in light of that.
With that said, I also exited my 8.5% position at the market open this morning.
Chris
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Someone I follow just stated it more clearly -
“I suspect TDOC was planning to enter the chronic disease space. With +51.5 million paying members already, compared to 410,000 for LVGO it was going to be a bloodbath. So instead of competing ferociously, they decided to merge.”
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Chris,
Maybe a noob question but why selling out of your position entirely and not waiting for the merger to be finalized? No conviction in TDOC bringing the kind of growth we’re all looking for at this board?
Brgds Paul
(long TDOC + LVGO)
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Maybe a noob question but why selling out of your position entirely and not waiting for the merger to be finalized? No conviction in TDOC bringing the kind of growth we’re all looking for at this board?
The combined entity is a slower grower. I’ve moved on the greener pastures.
Chris
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Hi Cobi,
This happens, almost automatically, for any merger. The sharks are swimming the merger waters hoping to pick up a few scraps.
Gordon
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As an owner of both LVGO and TDOC, and a believer in both their growth prospects, I took the opportunity to add to my TDOC holding at a 17% discount this morning. It appears to be bouncing off the day low. Hopefully this was a good long-term decision, but obviously only time will tell.
I just can’t imagine how the merging of 2 great, high growth disruptors is going to yield negative results when the dust settles.
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Details of the transaction and board members after merger and how its beneficial are posted on teladoc investor relations page…
Hope this helps.
https://s21.q4cdn.com/672268105/files/doc_presentations/2020…
Thanks,
-Raj
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re-posting from the other thread…
this is a surprise… few quick thoughts…
I do not see this negative… it seems lot more positive to me.
remember TDOC also bought InTouch which deals with sensors in healthtech… imagine LVGO is able to offer additional services with InTouch sensors in many more situations…
TDOC’s own organic revenue growth accelerated through this pandemic and jumped above 80%… so it is not a throw-away company to look down upon… in fact, that level of growth belongs to the top tier of stocks favored by this board right alongwith LVGO…
10% premium may just be incidental as both these companies’ stock has been moving a lot in last month… quite possible when they did the deal and set the ratio, the premium looked quite different…
Seeing this 10% as proof of something wrong is just to shallow a look…
I see this deal as creating a behemoth in virtual health sector… which is probably needed and help accelerate both of these companies… .
I am impressed by TDOC CEO Jason Gorevic’s ability to relentlessly work on building TDOC and put together a real force in health care that can deal with entrenched forces like insurers and hospitals… you need a large size to be effective in this business…
wont be surprising to see TDOC coming up with its health insurance in not far future…
Not impossible to see such a company ultimately ends up with Amazon / BirkShire / JPM initiative of creating independent health services…
With LVGO being my largest position and I started buying TDOC after last earning, I may reduce my overall combined position for portfolio management but I intend to hold really large position in merged company… I see it as real answer to many of health care problems in this country and very positive by many angles.
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Yesterday I grew tired of watching my limit orders for LVGO fail to be triggered because the share price just didn’t pull back enough. So I pulled the trigger myself yesterday afternoon, having failed to buy at much lower prices when I initially decided I wanted some shares. Lesson learned: easy to miss out on growth if you are waiting for a pullback. This strategy has served me well over the years, but not so much with hypergrowth cos.
So, I find myself in the situation of owning a piece of a company for less than 18 hours before it gets sold out from under me. Seems about right for the year of the pandemic! The share price has dropped a bit since the merger / acquisition was announced, suggesting that the market’s initial reaction is less than positive.
But what is behind the pullback? There seem to be a few reasons expressed here:
- Some are selling because they don’t see sum being equal to the parts.
- Some are selling for asset allocation reasons – don’t want so many eggs in a single basket, even if portfolio concentration seems to be the norm for many on this board.
- Some are selling because, while they see the combined company as a decent investment, they don’t see it as a hypergrowth investment. In other words, they believe there are greener pastures elsewhere that make it worth the tax hit many will take, even if they pay short-term capital gains.
- Some are selling because they don’t have the same confidence in the new management that they have in LVGO’s current management.
At the same time, someone is buying those shares that folks here seem to be unloading, and the dust is far from settled. I’ll continue to hold my tiny position of <.2% for the time being, if only to keep me paying attention. If others are adding shares at this point, I’d be curious to hear your thinking.
Regards,
Dorset
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Looks like a 2nd largest Livongo shareholder is onboard with the merger.
Kinnevik Backs Teladoc Health, Livongo Health Merger
7:07 am ET August 5, 2020 (Dow Jones) Print
By Dominic Chopping
STOCKHOLM–Swedish investment firm Kinnevik AB said Wednesday that it supports the proposed merger between Teladoc Health Inc. and Livongo Health Inc.
Kinnevik is the second largest shareholder in Livongo, holding 13% of the outstanding shares and corresponding to 11% on a fully diluted basis. It has undertaken to vote in favor of the merger and retain the main portion of its stake in Livongo until completion.
Kinnevik will receive $143 million in cash and 7.5 million shares in the combined company, corresponding to a 4.5% economic stake on a fully diluted basis.
The merger consideration values Kinnevik’s stake in Livongo at approximately $2.0 billion in total, based on the closing price of Teladoc on August 4, 2020.
“With the proposed merger, Kinnevik recoups almost our entire invested capital in Livongo in cash, and becomes a significant shareholder in the only consumer centered virtual care platform for a full spectrum of health needs,” Kinnevik Chief Executive Georgi Ganev said.
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The TDOC LVGO combo seems a stronger business proposition. Give advice hints nudges, if that does not work we have tele docs available. But stronger may still not be very good post Covid. The combined company will have to do great to warrant TDOC price. LVGO was getting close to saturating the insurance company market and TDOC has lots of local competitors, docs that can see you in person if needed and may be part of a trusted network. So I got out this AM.
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Sorry for this short post but I thought of letting you know that I sold out of LVGO today.
Saul, GauchoChris, Bear and Tinker pretty much explained anything I could have thought about supporting my decision to sell.
LVGO was my smallest position and I’m happy to be long on my remaining list of 7.
Cheers!
Ronjob
long < ZM, DDOG, CRWD, FSLY, OKTA, NET, AYX > Out: LVGO
P.S. AYX is not my smallest position.