Thread by @sebidscap

Just spent 4h on $TDOC $LVGO merger S-4/A (sec.gov/Archives/edgar…), carefully read first 200p, skimmed the (repetitive/formulaic) rest.

Most important stuff:

pic of pre-synergy & standalone financial assumptions for next years.

(btw: synergies are + $500mn run-rate by 2025)

Means that end of 2022, ex merger synergies, one would own combined entity with $2.631bn rev that grows to $3.449bn in 2023.
31.09% growth + 17.14% EBITDA margins for 2023.

[Again, that's ex merger synergies, which are probable bc <25% customer overlap + international expansion]

Fair 2023 forward multiple for that?
Assume 155mn $TDOC shares out. (currently 143.1mn look-through $TDOC post merger)

15x? = $3.449bn -> $51.736bn mcap -> $333 share price.
(That's pre merger synergies!)

Current val of ~$27.5bn mcap is 8x sales on 2023.

Rule of 40, only 8x?!

Seems too cheap! Why would sth with 31% growth & 17% EBITDA margins trade at 8x sales? (again, ex rev synergies that result in higher growth).

My verdict: Love what's qualitatively happening and quantitatively imo CAGR forward still so high, simply not going to be penny-foolish.

Maybe roughly $3.7bn rev for 2023 with merger synergies!
TAM ~$121bn. Clear leading company. New gorilla. Tailwinds galore.

If it's 16x forward sales EOY 2022 ($3.7bn sales in 2023), at 155mn $TDOC shares, that's $58.9bn mcap and $380, which would result in a double.

Not assuming a 2y2x...Just giving scenarios.

I simply let Mr. Market figure out if this is worth 8x or 20x sales in 2023.

(I plan to hold this for decades, so actually not THAT interested about EOY 2022 multiple guessing game, just think 8x rev could just as well be 16x, too.)

Wanted to highlight current market assumptions & scenarios, wanted to provide you information. You decide if CAGR is good enough for you. Even though I plan to hold truly long-term, medium-term CAGR still looks very satisfactory to me.
Imo top 1% companies = overtly cheap, often.

...Then those $LVGO and $TDOC projections. If it's actually ~$2bn uFCF 2030 for $LVGO alone, I will have bought for PE of 1. And I would make >30x in 10y. I'm at ~6x now, and I need 5x next 9.3y to get to 30x.

If it's 4x next 9.3y for combined entity, obviously I won't complain.

Of course these are simply highly abstract projections...

So, if you want to get up to speed on $LVGO + $TDOC, the latest investor presentation from 03.09.2020 is basically magnitudes better & great investment on your time: s21.q4cdn.com/672268105/file…

I recommend the presentation.

Also have read all the other merger documents, those 425s, all conference transcripts. Merger has my approval.

Really want to step back now & just let management execute. Big fan of Glen Tullman. Can recommend to read 10p of "Background of merger" (page 79), great negotiating!

Lesson learned: Don't think that many people read those documents? Feels somewhat deserted. Why? No discussions online!

Repeated actual reading of documents just feels proper.
(I'm NOT an authority on those things, - it's simply that hardly anyone else writes about this!)

Another lesson: I believe I can clearly show that, - if you simply bring 2-3y of patience, this looks quite affordable based on management's projection.

Now this becomes a matter of believe. Can it be true that the leading telehealth company is quite affordable during pandemic?

Assumption prob is that such a company, esp during pandemic, is wildly expensive, right?

Imo those assumptions are wrong. My guess is that there are extremely few people who actually have a look, and >90% of market participants are traders that get their thoughts second hand.

I hope that I'll be compensated (soonish) for my ability to sit, concentrate & read... Feeling ready for more responsibility. I'm having fun, I'm performing well and I believe I'm doing at least more than most, investment professionals or not. I feel ready to manage more capital.