Teladoc Health’s acquisition of Livongo Health requires a leap of faith. One lossmaking virtual health group is buying another for $18.5bn, including debt. The deal is predicated on the assumption that the explosive growth seen in telemedicine will continue after the coronavirus pandemic blows over. It’s a hefty bet. An initial 20 per cent slump in Teladoc’s share price on Wednesday shows investors need convincing.
To be fair to Teladoc, it’s easy to believe your own hype when your shares have surged more than 153 per cent since the start of the year. Demand for virtual consultations with physicians has soared during the pandemic. Livongo, which deploys technology to help patients manage chronic ailments like diabetes, has enjoyed a similar boost in demand.
The Trump administration this week signed an executive order to expand telemedicine coverage to Medicare and Medicaid recipients. So it makes sense for Teladoc to bulk up to win more contracts.