Is it real?

As we begin the new week and for our fellow tribe members a New Year one question that remains unanswered is how long will the Livongo limbo last and just how low can this stock go. As we begin trading this morning the stock sits at $17.05 down some 55% since its IPO back in late July. In an astonishing move downward the stock has plummeted over 22% in the last 5 trading days.

Livongo is covered by 9 analysts who have initiated coverage as follows;

Goldman Sachs, Canaccord Genuity, Needham – all said Buy

J P Morgan, Piper Jaffray and Key Banc – all said overweight

Morgan Stanley – equal weight

SVB Leerink – outperform

Chardan Capital – neutral

Several of these firms have issued glowing reports on the company hence the reason we kept noting this had all the signs of a classic pump and dump. However as glowing as these reports were and as quickly as the dump has come something else seems to be going on here. The trading pattern continues to indicate that there is no end in sight as every time it looks the bottom might be forming and that dead cat will be thrown out the window, that poor dead cat continues to wait.

Looking back on the company’s earnings call, so far the only publicly available information since the IPO, which yes was subpar performance, but it wasn’t so horrible to warrant this kind of dive in the share price. Especially since it was their very first call ever and given the love shown for the company prior to the call we thought for sure they would give the company a break. That obviously didn’t happen which makes one wonder is there something known only to a select few which is causing this slide?

Frankly with so little data it is very difficult to get a clear picture of just what the heck is going on. Yet our gut and many gray hairs tell us that something deeper is going on here that no stock goes from a beautiful swan to an ugly duckling overnight. It’s not logical that any company would go from being the bell of the ball to an unwelcome guest so quickly. As Momma Kliff used to say when all the logical explanations don’t work the illogical or crazy explanations become logical.

Now what we are about to say will boarder on crazy but as Mom said when all the logical explanations don’t work you have to consider what seems illogical. AND TO BE VERY CLEAR HERE WE HAVE NO INSIDE INFORMATION WE HAVE NOT TALKED WITH ANYONE AT THE COMPANY NOR HAVE WE HAVE TALKED WITH ANY OF THE ANALYSTS. THIS IS OUR WILD ASS GUESS AS TO WHAT THE HELL IS GOING ON.

Could it be there is no there there? That Livongo for all its way cool and whiz bang is nothing but a scam? Or not so much a Theranos type scam but an accounting house of cards? We keep thinking back to the earnings call and the convoluted explanation the company came up with for how they calculate the value of a contract. Could it be that some smart folk have figured out that no matter how the company calculates the value there really isn’t much value at all that the company cannot and will not ever make money.

We’d say that time will tell but given how this stock is trading time doesn’t seem to be something the company has. If we were really nuts and off the deep end a good conspiracy would be should the stock rebound that the analysts, company and short sellers pulled a fast one and fooled us all. Adding to any good conspiracy is that somehow the company’s leadership was complicit in the scam and it will take an inside whistleblower to reveal the truth.

Just to reiterate this is our guess at what the hell is going on here. We are trying to find anything that explains a fall this far this fast. Since none of the logical explanations work and given the lack of data it’s time to consider the illogical. As Spock once said;

“Once you have eliminated the impossible, whatever remains, however improbable, must be the truth.”