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THREAD ABOUT THE $TDOC & $LVGO MERGER NONSENSE:
(Wait for it, it might not be the kind of nonsense you are expecting me to address...)
(Wait for it, it might not be the kind of nonsense you are expecting me to address...)
TLDR: Investors holding $LVGO stock seem to be extremely concerned about the move.
Imho, there is no reason for this and investors selling their stock because of the merger are clearly not long-term focused and/or they do not understand the business.
Imho, there is no reason for this and investors selling their stock because of the merger are clearly not long-term focused and/or they do not understand the business.
1) Please, tell me: How does the business change just because of the merger? Could you tell me why $LVGO& #39;s business model is going to deteriorate after the merger? (Besides management taking slightly different actions)
Because if it& #39;s not changing, this segment of the whole...
Because if it& #39;s not changing, this segment of the whole...
... company will preserve its high growth prospects...
Oh yes, and other characteristics that many seem to not mention/care about too, such as high revenue recurrence, high switching costs and barriers of entry in the form of high costs to develop similar technology.
Oh yes, and other characteristics that many seem to not mention/care about too, such as high revenue recurrence, high switching costs and barriers of entry in the form of high costs to develop similar technology.
Interestingly enough, concerns about the business seem to be more related to the NARRATIVE that is driving the price in the SHORT TERM, but they fail to mention that the LONG TERM story remains intact or becomes even better.
Wow... Ok.
Wow... Ok.
2) Why would you not want to keep exposure to $LVGO if you thought it was such a great business before?
(Yes, it is true the exposure comes at the cost of "owning" $TDOC too, more on this in the next question.)
(Yes, it is true the exposure comes at the cost of "owning" $TDOC too, more on this in the next question.)
3) Why is $TDOC such a bad business that you don& #39;t want to own it?
They have just acquired a company that you loved (or at least you did a couple of hours ago). If $LVGO& #39;s business is so good you& #39;d want to own it, then it implies GREAT capital allocation from $TDOC.
https://abs.twimg.com/emoji/v2/... draggable="false" alt="😅" title="Lächelndes Gesicht mit offenem Mund und Angstschweiß" aria-label="Emoji: Lächelndes Gesicht mit offenem Mund und Angstschweiß">https://abs.twimg.com/emoji/v2/... draggable="false" alt="🤦♂️" title="Mann schlägt sich die Hand vors Gesicht" aria-label="Emoji: Mann schlägt sich die Hand vors Gesicht">
They have just acquired a company that you loved (or at least you did a couple of hours ago). If $LVGO& #39;s business is so good you& #39;d want to own it, then it implies GREAT capital allocation from $TDOC.
4) What is the matter with competition? Competition would& #39;ve came in the future no matter what.
Why would it be more difficult for both to dominate the market being together than operating on their own?
Why would it be more difficult for both to dominate the market being together than operating on their own?
One of the most nonsensical arguments I& #39;ve read (a couple of times) is that they& #39;re hurrying up to pump the valuation and get out of the market because there will be a lot of competition in the future.
Well, this was well-known before the merger announcement, this should already be included in your thesis. Why would you bring up a reason like this now?
Great businesses atract competition, by merging they& #39;re precisely trying to better fight off competition.https://abs.twimg.com/emoji/v2/... draggable="false" alt="🤦♂️" title="Mann schlägt sich die Hand vors Gesicht" aria-label="Emoji: Mann schlägt sich die Hand vors Gesicht">
Great businesses atract competition, by merging they& #39;re precisely trying to better fight off competition.
And, btw... YES, that& #39;s how financial markets work: you generate value, you raise more money to generate more value and then generate value to raise even more money.
Great thing you figured out they& #39;re doing this to increase the valuation...https://abs.twimg.com/emoji/v2/... draggable="false" alt="🤦♂️" title="Mann schlägt sich die Hand vors Gesicht" aria-label="Emoji: Mann schlägt sich die Hand vors Gesicht">
Great thing you figured out they& #39;re doing this to increase the valuation...
5) What& #39;s your concern about the business being sold/merged?
Yes, management decided to sell the business... But the offer they are accepting will be mostly paid in $TDOC stock.
Yes, management decided to sell the business... But the offer they are accepting will be mostly paid in $TDOC stock.
One could argue that they don& #39;t seem bothered about owning $TDOC stock. We& #39;ll see if they sell in the future tho...
THIS right here is my biggest concern but it& #39;s easily trackable and we& #39;ll know soon enough.
THIS right here is my biggest concern but it& #39;s easily trackable and we& #39;ll know soon enough.
If they sell a lot of their stock, it will definitely be a BIG red flag.
But you cannot argue that an offer comprised of mostly cash would& #39;ve been a GIGANTIC red flag, a real problem. Can you?
But you cannot argue that an offer comprised of mostly cash would& #39;ve been a GIGANTIC red flag, a real problem. Can you?
Also, regarding 4) and 5), consider this:
Taking into account yesterday close prices, the sale would be at a premium of 10% and close to 2% premium with prices when I& #39;m writting this thread.
Taking into account yesterday close prices, the sale would be at a premium of 10% and close to 2% premium with prices when I& #39;m writting this thread.
Premium ranging from non-existent to 10% + holding stock of the new company doesn& #39;t sound to me like shady at all...
It sounds like a merger with the intention of doing business together in the future.
(Yes, that& #39;s essentially a merger, duh...https://abs.twimg.com/emoji/v2/... draggable="false" alt="🤦♂️" title="Mann schlägt sich die Hand vors Gesicht" aria-label="Emoji: Mann schlägt sich die Hand vors Gesicht">)
It sounds like a merger with the intention of doing business together in the future.
(Yes, that& #39;s essentially a merger, duh...
LAST ONE:
6) Please, make me understand why $LVGO and $TDOC businesses are worth less operating together than doing so separately?
(And I don& #39;t mean stock price discounting the takeover premium for both companies, I mean intrinsic value of both businesses.)
6) Please, make me understand why $LVGO and $TDOC businesses are worth less operating together than doing so separately?
(And I don& #39;t mean stock price discounting the takeover premium for both companies, I mean intrinsic value of both businesses.)
My take: $TDOC could become a bigger platform/aggregator in the healthcare industry than I initially though.
Besides disrupting the HC industry with their current business model, it seems like they are willing to take the next step and anticipate future competition by...
Besides disrupting the HC industry with their current business model, it seems like they are willing to take the next step and anticipate future competition by...
starting to aggregate other disruptors and bringing together demand and supply, with a lot of bargaining power over both sides.
With $LVGO and some other companies that could be bought in the following years, the company has a chance to create a business that offers an...
With $LVGO and some other companies that could be bought in the following years, the company has a chance to create a business that offers an...
essential service to an inmense TAM, more than decent unit economics when you scale the business, close to completely recurring revenue, high switching costs, other barriers of entry and more.
Imho, $LVGO+ $TDOC has LONG written all over it.
Imho, $LVGO+ $TDOC has LONG written all over it.
I& #39;ve been trying not to sound too hostile, but I& #39;d like to see some good answers to these questions.
If not, honestly, I feel that investors selling have no idea why they owned the company in the first place or have no idea why they& #39;re selling it.
Pick your poison.
If not, honestly, I feel that investors selling have no idea why they owned the company in the first place or have no idea why they& #39;re selling it.
Pick your poison.
My view is that most shareholders have owned the company due to the growth narrative and now seems like a good moment to secure their multi-bagger...
But that could come at a (opportunity) cost in the future and shows how short-term focused we can be as investors...
But that could come at a (opportunity) cost in the future and shows how short-term focused we can be as investors...
and how difficult it is to hold a winner.
Thank you for reading, I& #39;d be more than happy to hear from you about the future of these two companies.
Thank you for reading, I& #39;d be more than happy to hear from you about the future of these two companies.
