Well at long last the wait is over and Livongo is now a publicly traded company. Priced at $28 per share the IPO as expected has gotten off to a big start with recent trades around $41 per share. Regardless of where shares close at today a few things are worthy of mention, some will be obvious others not so, so let’s get right to it.
1. Digital Diabetes is smoking hot and Livongo is just the first of many who will hit the capital markets.
2. Livongo will be given the benefit of every doubt and really doesn’t have to perform well in the near term. As the IPO proves investors don’t seem to care how much money the company losses or how competitive this space is becoming. Nor do they seem to care much that the Livongo platform is based on old outdated technology or that this platform is easily replicated.
3. Who will be the greater fool? Everyone including us here at Diabetic Investor believes that Livongo will get acquired. But what happens if this doesn’t happen? Could Livongo become the next Insulet?
Just as reminder for those with short memories back when Insulet went public everyone thought they too would be acquired. With JNJ acquiring Animas and Roche buying Disetronic it seemed a forgone conclusion that Insulet too would be acquired. In fact early investors in the company were counting on this happening.
Well as we all know this didn’t happen and while the company is doing just fine today it’s been a rocky road for Insulet over the years. As one seasoned diabetes device executive used to say a good company should be able to stand on its own two feet and not be built just so someone else will come along and buy it. For should that not happen watch out. Insulet is an example of this as they were built to be acquired.
It took years and a major management shakeup before Insulet became a viable company on its own. Will Livongo follow this path? Obviously, it’s too early to tell but it has all the signs it could.
4. Pay close attention to what current management does. We suspect if form follows function several key team members once their options vest and their lock-ups expire will cash out and move onto greener pastures. These folks don’t need to wait around for a possible buyout as they have already made boatloads of bucks. The key will be who stays and who they bring in as that will be a sign telling us if they actually have to run the company or is it being set up for sale.
5. Who will be next? We all know it’s just a matter of time before another digital diabetes company does their IPO so who will it be? Could Onduo use the IPO route, OneDrop or will a semi-digital company like Companion capitalize on all the attention being focused on diabetes. They aren’t a digital company per see but that really doesn’t matter with investment bankers who are looking for companies in a hot sector and as we keep saying nothing is hotter than digital diabetes.