The Livongo Limbo How Low Can it Go

While we can’t say we are shocked by the continued skid in Livongo’s share price since its IPO, it is somewhat surprising how quickly investors have bailed. As we noted in many past posts on Livongo and the love analysts had for the company, this had all the signs of a classic pump and dump. We just expected more pumping before the dumping began. Consider the following;

The company went public on July 25 hitting a high of $45.46, closing at $38.10 giving it a market cap which exceeded $4 BILLION.

Shares closed at $19.39 yesterday, down almost 14% sinking the market cap to just over $1.8 Billion.

Since its IPO the stock has plummeted almost 50%. Over that same time frame all the major indexes have been basically flat so the fall cannot be linked to market factors.

By way of comparison other diabetes stocks have fared better – Tandem -1.69%, Dexcom +6.41% and ya gotta love Insulet powering up 36.09%. So the fall cannot be linked to investors selling off their diabetes stocks.

Strangely there is nothing known publicly that would seem to have caused this slid. As we noted the earnings call didn’t go all that well, but we thought for sure given the love being shown the company by the analyst community the company would get a pass after all it was their first earnings call.

Note investors aren’t just dumping they are dumping in a big way. Looking at the volume of shares being traded each day it’s not a good sign when the volume on down days is 2, 3 or 5 times as much then on up days. Even stranger for a stock that has fallen this much this fast we have yet to see a dead cat bounce or any signs that shares have hit bottom. This makes one wonder just how low will the stock go, when will the music stop and when will the Livongo limbo end?

Worse even when it does find its bottom, what will then drive shares higher? That’s even scarier to us as again given what’s publicly known there is nothing on the horizon which would drive shares back up. Frankly nothing much has changed since the earnings call and we see no need to change our assessment of the company or its long-term outlook. We knew Livongo would be a major bust, but we are astonished that it busted so quickly.

We have no idea if a fall this far this fast is setting any sort of record for how quickly gold turns into sand. The only comparable fall we can think of is Amira Medical. Now many of you will say who the hell is Amira Medical as we are going way back for this one. How far back? Nearly 20 years back. Way back then Amira was the first BGM company to come up with an all in one meter with alternate site testing. Never mind the damn thing didn’t work all that well, when has that mattered in our wacky world.

Back in the day everyone was in love with Amira many believing they would come to dominate the BGM space which back was on the verge of exploding. Hard as it is to believe back then BGM was growing in the high double digits. Or to put it in current terms back then BGM was growing like CGM is today. Given the then market dynamics many believed Amira would either go public or get acquired.

Well the IPO never came; the company eventually feel on hard times and was eventually bought by Roche for $150 million and they only wanted the IP portfolio. Come to think of it this was not dissimilar to what happened at AgaMatrix another BGM company which was once hotter than Georgia asphalt, another company which everyone thought would come to rule the BGM universe, go public and then get acquired none of which happened. AgaMatrix still exists but as a shell of its former self.

Yet in both instances the companies did not fall as far and as fast as Livongo has. If our math is correct there have been 43 trading days since the Livongo IPO. Which means the stock on average is falling over 1% per day. Think about that just for a moment and then consider this. Should this trend continue the stock will hit $0 around the Thanksgiving holiday, talk about wild turkey.

No we don’t think the stock will hit $0 and yes it will eventually find a bottom. We would also anticipate at some point a dead cat bounce. However given that hasn’t happened yet and how the stock continues to sink that poor dead cat is just waiting around to be thrown out the window.

So back to our original question just how low will this stock go is anyone’s guess. Welcome to the Livongo Limbo, it ain’t the hippie hippie or the macarena this dance belongs solely to Livongo. Just how low can they go?