Will Livongo be atoning for its sins?

On this day of atonement it could be Livongo that pays a heavy price for their sins. Per a press release issued yesterday;

“Kaskela Law LLC is investigating Livongo Health, Inc. (“Livongo” or the “Company”) (NASDAQ:LVGO) on behalf of investors.

The investigation seeks to determine whether Livongo and/or the Company’s officers and directors violated the securities laws in connection with Livongo’s July 2019 initial public offering (“IPO”) of securities, and whether investors have been harmed as a result of such actions.”

The full release can be found at https://finance.yahoo.com/news/kaskela-law-llc-announces-investigation-231000742.html

We suspect this will NOT be the only investigation as we have seen this movie before and if it follows standard operating procedures other law firms will jump into the fray. This isn’t uncommon especially with Livongo whose shareholders have seen the stock plummet since it’s IPO. Listen when a stock falls this far this fast with no logical explanation shareholders are not just mad as hell but skeptical that things are one the up and up.

As we suspected shares jumped after the company announced their new federal contract. Also as we anticipated investors didn’t bother with the details of this deal preferring instead focusing on the headline. The reality is the company is basically guessing as to what the real value of this contract will be. Additionally everyone dismisses the additional costs the company will incur to get this program up and running. Even if the company hits its projected revenue no one knows if they will actually make a profit on the contract.

Let’s be very clear here we have no clue if the company has done anything illegal. That’s for the courts to decide. What we do know is the company is playing very fast and very loose with how they project revenues. As we noted many times, we could care less how many contracts they sign what we care about is how patients they enroll and how many remain enrolled.

The problem as we see it is all the analysts want to believe in digital diabetes but fail to grasp some basic business fundamentals. Namely it’s not revenues that matter but profits and right now Livongo has yet to demonstrate they can turn a profit. Like so many these analysts are fascinated on the whiz bang way cool rather the mundane blocking and tackling that needs to be done to win the game. We’ve said it a million times it’s one thing to develop a toy it’s quite another to run a profitable toy company.

Looking at those pesky facts Livongo has a limited operating history making difficult if not impossible to judge whether their projections are real or just a wild ass guess. Based on their limited public statements they have noted less than 30% of eligible patients actually enroll in their program, a number they HOPE to push to over 70%. Yet in our wacky world instead of making them PROVE they can do this analysts seem to believe they will reach the 70% enrollment rate. Momma Kliff would call this wishful thinking, we call it downright foolish and very dangerous.

From the beginning we suspected Livongo was a pump and dump. That the company and the analysts who cover them would ride the digital health craze before it became obvious that the only thing Livongo is really good at is losing money. As it’s turning out others are beginning to question whether besides not being able to make money whether the company was less than honest.