In a surprising merger deal announced earlier today by Teladoc Health (NYSE:TDOC) and Livongo (LVGO) we learned that all LVGO shareholders will receive 0.592 shares of TDOC. On top of this each shareholder will receive $11.33 for each Livongo share, representing a value of $18.5 billion based on the closing price of Teladoc Health shares as of August 4, 2020.
How will this affect LVGO stock price?
Even though this merger will create a beast of a company I am sure everyone noticed the difference between YoY growth of Teladoc vs Livongo.
Livongo was a triple digit SaaS gainer in the previous quarter while combined entity growth will be way lower than $LVGO and at current valuation, $TDOC is very richly valued . On top of this 25% of $TDOC rev. is non-recurring.
Naturally some LVGO stockholders are not happy about this deal as they had papers of a fastly growing company in their hands, but what will happen after the deal no one knows, especially since the current TDOC CEO will become a CEO of the new company.
Disappointed to see as $LVGO shareholder. Time to sell?— Jason Heidl (@Cappin__Crunch) August 5, 2020
Livongo was the high-flyer and one of the fastest growing companies this year, so this might be a time to cash in on your stock, at least for the moment.
Once the dust settles things might go back on the track again, as we are sure Teladoc Health’s global reach, including 70 million customers in the U.S., and significant access to high growth segments in that market give Livongo a stronger platform to reach millions of new consumers, at risk of, or living with chronic disease.
More potential clients means more recurring revenue which equals more money for stock holders.
Of course the new entity will need to turn those leads into clients but with the expertise and the lack of serious competition this might end like a match made in heaven for stockholders.
In a short term we will witness greater price volatility compared to previous 6 months and this might be bad for investors that recently bought LVGO shares. But once the weak hands sell their portfolio things may turn very positive for everyone that stays for a long run.
Investing in a fast growing consumer healthcare company can be a wild ride sometimes, but most of the time this ride pays off big time.
Seems like Teladoc is getting a hell of a deal.
Some investors feel as if smart people behind Teladoc used this deal to save their stock value this season:”Initial take is that $lvgo needs to be sold. Good amount of $tdoc rev non recurring & too richly valued & would fall drastically on vaccine news. Smart of them to use their stock to buy given its market cap/valuation. $lvgo much better biz that will now be dragged down by $tdoc”.
Another investor is scared that:”the combined entity is not going to be as good a growth machine as Livongo standalone.”