LVGO - Why the Market Hates the Teladoc-Livongo Deal
A merger between two of the hottest stocks on the market may sound like a match made in heaven. But when one emerged recently, investors didn't think so.
Wednesday morning, Teladoc Health (NYSE: TDOC), the country's leading telehealth service, said it would acquire Livongo Health (NASDAQ: LVGO), a provider of digital health monitoring tools for patients with chronic diseases, in an almost all-stock deal. And both stocks finished the day down more than 10%.
According to the terms, Teladoc will pay 0.592 shares of its stock (on Thursday, that equaled about $125) for each share of Livongo, plus $11.33 in cash. That was roughly a 10% premium to Livongo's closing price on Tuesday, but by the end of trading on Wednesday, Livongo stock was actually worth less according to the terms of the deal than it was as a stand-alone company prior to the deal; Teladoc stock fell 19% during the trading day, essentially lowering Livongo's value by the same amount.