So what does this mean exactly? If LVGO is valued at $158.99, do you sell if the stock price goes above that or do you hold and that number continues to rise (or lower) until the deal goes through? The way LVGO stock has been going, it could be $200+ by the time this deal goes through at the end of the year. Or will this news of a merger stall that rise?
I guess I’m just wondering what the benefits are here to holding onto the stock vs selling once it hits a certain price…?
Less than 10 minutes after earnings are announced with 125% growth in revenue, the merger is announced with 10% premium. One hour later a shareholders rights law firm announces investigation of proposed sale.
This has turned into being a circus.
It’s because if LVGO just posted 2Q and +100% growth and are doing so well then why sell at a valuations of just 10% from where it’s at now? I was early into LVGO but will be selling out today. I’ll bite the bullet on the taxes but I got out of TDOC last month. I’m in the medical field and while I do believe virtual visits are taking off and will the the medical standard in the future, there are just way too many options for physicians out there. I might just hold onto the cash and wait for a pull back on my longs.
These things take a long time to work out and negotiate between the 2 companies. Everyone is saying it’s a bad deal because it’s only a 10% premium versus yesterday’s closing price - but the whole reason the price got as high as it did is likely because some people in the industry knew that this was about to happen. IMO LVGO had already gotten to crazy valuation territory, so I don’t think you can judge the deal based on yesterday’s price.
The fact that there have been almost no insider sales of stock was a big clue that something like this was in the works. I pointed this out a couple of times last month. With the huge run-up from $25 to $75, then $100 there should have been a bunch of insiders cashing in at that point. The fact that they were not was an indication that either they knew the price was going way higher, or there were some negotiations happening that made it illegal for them to cash in their stock at that point.
People have commented that the fact that LVGO would sell out at this time is an indication that they don’t have confidence in their future growth. That is one possibility. Another possibility is that they know if they didn’t sell out that TDOC is going to get into this space one way or another. Then they would be facing competition from the 800lb Gorilla. I personally think that is what is happening right now between MSFT and WORK. WORK refused to sell to MSFT and now they are facing some stiff competition from them. This was a pragmatic business decision and anyone who has invested in LVGO is making a good profit.
Saul, can you shed some light on this why this does not make sense to you?
Sorry, I said I wasn’t going to comment further, but I’ll answer this. Can you think of Crowdstrike, or Fastly, or Datadog, or Zoom, announcing revenue growth at 125% and then saying 10 minutes later that they were selling out at a 10% premium??? That’s what doesn’t make sense.
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!
I was on the fence due to the tax implication but the reaction by Mr Market seems slightly overblown. I will wait to see for a day or two to see if there is some pull back to a slightly higher price or will sell though today seems overblown.
It seems the market is not liking the merger. I must admit that I had more conviction in Livongo than in Teladoc but TDOC kind of exceeded my expectations. Since I’m long both I’m not going to do any trading unless I discover some new news. My internet connection is a bit flaky his morning and I was not able to listen to the Livongo earnings call. The only tidbit I got was that Livongo will have access to 70 million Teladoc medical histories to sharpen its AI learning. There might be more synergies in the merger than meet the eye at first sight.
I’ve been a long term LVGO bull as well and it’s been a big winner. This really caught me by surprise so it will take time to evaluate the impact. My initial reaction was disappointment since I also like LVGO better. But both companies are growing very rapidly. And there are significant potential synergies which could make the combined company a major force in teleheath going forward. Personally, I’m going to hold onto my shares longer term for now. I don’t like the uncertainty of this news but both have such great momentum that it would seem foolish to jump out now.
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
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
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.
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.
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.
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.
