La La Land

La La Land

First congrats to the L A Dodgers for finally after many attempts winning the World Series. Also hats off to the Tampa Bay Rays for playing some damn good baseball. Now that LA has both the basketball and baseball titles and Tampa has the Stanley Cup I guess Tom terrific and his Buccaneers are going to win the Super Bowl this year. That probably won’t happen but hey this 2020 and as we have seen this has been the wackiest year EVER.

When this year is over and damn don’t we all want 2020 OVER like yesterday, one of the wackier moments will be the Teladoc valuing Livongo at $18.5 Billion that’s right $18.5 Billion with a capital B. Since the merger isn’t final just yet both companies reported earnings yesterday with Teladoc also holding a call. Per the Livongo release;

“We generated new record-high EVA (Estimated Value of Agreements) of $146 million in the third quarter, which we believe demonstrates the continued strong momentum in our business,” said Zane Burke, Chief Executive Officer of Livongo.

This one sentence captures why this deal is wacky, EVA is NOT repeat NOT REAL money coming in the door. This is an ESTIMATE which means roughly calculate or judge the value, number, quantity, or extent of. This is NOT real money coming in the door and even worse these ESTIMATES are for the LIFE of the contract ASSUMING that they hit these ESTIMATES. There are more holes in these EVA’s then there are in the Chicago Bears offensive line and they stink as bad as the Bears o-line.

Reading through the Teladoc transcript we can see that Livongo has transferred their panache for bullshit to their new owners. Check out these beauties;

“We’ve seen tremendous interest from our clients around the world. And we’ve already successfully closed our first major cross-sale to GuideWell Health, the parent of Florida Blue. Florida Blue has been a long-time client of Teladoc Health, and we’re extremely excited to expand that relationship and bring Livongo’s platform to 50,000 of Florida Blue’s members living with diabetes.” – Jason Gorevic Teladoc CEO

Yep we just love when companies do this as YES they are bringing Livongo to 50,000 POSSIBLE patients this does NOT mean that they are adding 50,000 PAYING customers although given the way Livongo calculates their EVA’s who knows. This also is NOT a new relationship just one that has been expanded which is nice but really not big of a deal.

“As part of the new leadership structure announced earlier this month, we are also in the process of creating a new integrated research and development organization.” – Jason Gorevic Teladoc CEO

Yeah the Livongo executive team had the good sense to leave and cash out as they knew the shit will hit the fan and they didn’t want to smell bed when this happens. As Amarillo Slim, the greatest proposition gambler of all time said, You can sheer a sheep many times, but skin him only once.”

“The similar mission-driven cultures and shared vision of the 2 organizations has become apparent through this process” Jason Gorevic Teladoc CEO

Jason hit the nail on the head with this one as both Teladoc and Livongo are full of it. Folks we hate to point out the obvious here, but we must – THIS DEAL WAS MADE POSSIBLE BY COVID WOULD NOT HAVE HAPPENED WITHOUT COVID AND WILL FAIL ONCE COVID GOES AWAY. Hence the reason the Livongo management team is leaving now.

Just by comparison Dexcom a company that has no reason to bullshit anyone, has a real product, real revenues, a great product and an ultra-talented management team is watching its stock get hammered because their third quarter results weren’t as great as expected. Combine this with the fact that most of the analysts who cover Dexcom still do not understand the dynamics of the CGM market.

We said this after Dexcom reported and will say it again EVERY TIME PEOPLE DOUBT THIS COMPANY, EVERY TIME SHARES SELL OFF THEY COME ROARING BACK ONLY TO NEW AND HIGHER HIGHS AND THIS TIME WILL BE NO DIFFERENT. We do not how long this will take but it will happen as there is nothing structurally wrong with Dexcom.

We would further recommend to investors still holding Livongo shares FOLLOW THE EXAMPLE SET BY YOUR DEPARTING MANAGEMENT TEAM – TAKE THE MONEY AND RUN.