Pineal Capital urges Teladoc to cut more costs, consider break-up of core units

Pineal Capital Management issued an open letter to the Board of Teladoc (TDOC) Health saying it has engaged with the board and management team of Teladoc for “several months.” “Whilst we have found the management team open and engaging, the board’s slow pace of action around key areas leaves the company open to an opportunistic takeover approach given the depressed valuation of the company’s stock at present,” the letter reads. “This is more pertinent now than ever, given the recent Talkspace transaction. As shareholders we would like the company to unlock the tremendous value that we see, as an independent, public company. We believe the current market price is heavily disconnected from the true embedded value of the business and significantly misprices its positive, longer-term prospects.” In the letter, Pineal Capital noted that a number of missteps have eroded investor confidence in Teladoc, including overvalued acquisitions, a “poor history” of capital allocation, the lack of a plan to “address the chronically undervalued and underperforming” stock price, the absence of clear investor communication, and equity dilution. The investor urges the board and maangement to further cost-cutting initiatives to expand margins, authorize a “major” share buyback program, and open up a strategic review, includidng the exploration of a break-up of its twto core businesses into separate entities, via a sale or spin-off transaction. “As shareholders, we are excited by Teladoc’s fundamental potential but concerned that continued inaction risks a private-market bid at a level well below true intrinsic value,” the letter reads. “We do acknowledge the good progress made to date and the purpose of our letter today is to highlight the future opportunity we see and how the company should best capitalise on this in relation to its public listing. The window to act strategically is open today and we strongly suggest that the Board and management communicate, and then execute on a clear, multi-year plan with urgency addressing each of the points outlined in this letter.” Shares of Teladoc are up 3.1% in afternoon trading.