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Selloff continues for telehealth IPO Babylon Holdings

UK-based firm has lost more than half of its value since its October IPO which raised money for US expansion.

Luck, as they say, is timing and opportunity. For Babylon Holdings Ltd., a recent telehealth IPO, its timing has been unlucky.

The UK-based company which counts Telus Health as a customer, listed in New York in October, (NDQ:BBLN) just as the selloff in tech startups accelerated. Investor focus shifted to worries about rising interest rates and inflation and away from fast growth, but uprofitable companies. An added concern since Russia’s invasion of the Ukraine invasion is a global recession.

Babylon offers online services that connect doctors, patients, and pharmacists via their phones or computers. It also offers records and bookings management software for doctors.

It has 440,000 customers in 15 countries with partners that include the British National Health Service, Telus and Microsoft Corp. Its goal is to use the IPO proceeds for US expansion.

Babylon’s shares have fallen steadily ever since the IPO. They were listed at $9 (all figures in US dollars) and at the Mar. 31 closing price of $3.89 have lost 57% of their value.

This is even though the company has met targets laid out in its listing documents. In the fourth quarter to Dec. 31, 2021 Babylon added 100,000 US customers who are covered by agreements with a health plan or healthcare provider. It added another 100,000 in January, bringing the US total to over 275,000. 

Babylon ended 2021 with annual revenues of $323 million, four times the $79 million in 2020. It expects revenue to grow another three times this year to between $900 million and $1 billion.

Another positive indicator is that Babylon’s loss as a percentage of revenue is falling. It lost $225.8 million in 2021, on an adjusted basis, which was 70% of revenue. That compares with a loss of $188 million in 2020 which was 237% of revenue. The 2021 fiscal year saw large one-time investments in its technology infrastructure, which will allow it to improve its margins in 2022. The company expects to be profitable by 2025.

An earlier article noted that Babylon has an impressive list of partners. It is growing quickly. It has a proven technology platform which is almost a decade old and telehealth is here to stay. Its major shareholders have deep pockets and staying power.

Even so, while the selloff is overdone, in this environment, the shares are unlikely to rebound until conditions become clearer.

This is an edited version of article that appeared in the Internet Wealth Builder on March 26. 2022.

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