Lockup Expiration Is A Bad Prescription For GoodRx

Mar. 19, 2021 3:00 PM ETGoodRx Holdings, Inc. (GDRX)12 Comments

12.67K Followers

Summary

When the GDRX IPO lockup expires on Monday, March 22nd, pre-IPO shareholders and company insiders will be able to sell millions of currently-restricted shares.
Significant sales of currently restricted shares could flood the market and negatively impact the price of GDRX when the lockup expires.
Investors should short shares of GDRX before March 22nd or in the early hours of the March 22nd trading session.

March 22, 2021 concludes the 180-day lockup period of GoodRx Holdings Inc. (NASDAQ:GDRX).

When the lockup period ends for GoodRx, its pre-IPO shareholders and company insiders will have the opportunity to sell millions of currently-restricted shares.

(Source: S-1/A)

The potential for a sudden increase in stock flooding into the secondary market may negatively impact the share price of GoodRx.

Currently, GoodRx trades in the $36 to $37 range, a return from IPO of nearly 12%.

Business Overview: Provider of Telemedicine Platform

GoodRx began as an online tool to compare prescription prices. Today, the company offers a variety of telemedicine services across its expanded platform including medical provider consultations and other health related services and information.

Users access the platform from either a mobile app or their website. GoodRx tracks the prices of prescription drug prices in the U.S., and it offers free coupons for discounts on the medications. Its platform monitors over 75,000 pharmacies, and as of February 2020 had over 14 million online visitors per month.

The company was founded in 2011 in California. GoodRx partnered with major drug companies in 2017 to secure lower prescription medication costs. In 2019, the company acquired HeyDoctor, which is a telemedicine provider. HeyDoctor was rebranded to GoodRx Care. The GoodRx platform enables individuals to meet with a physician online and get a prescription for certain medications starting at $19 regardless of insurance. In addition, the platform offers medical testing services.

As of the second quarter of 2020, GoodRx had 15 million monthly active users. The company reports that its services saved consumers approximately $20 billion through June 2020. GoodRx has been the most downloaded mobile app in the Google Play Store and the Apple App Store for the last 3 years. The app rating in the Apple Store is 4.8 out of 5.0 stars. Its rating in the Google Play Store is 4.7 out of 5.0 stars. The app has more than 700,000 ratings across both stores. The HeyDoctor app is rated 5.0 out of 5.0 stars and more than 8,000 reviews.

According to its SEC filings, the company reported a net profit of $85 million in the first 6 months of 2020. This is an increase over $66 million for the same time period in 2019.

Financial Highlights

GoodRx reported the following financial highlights for the 4th quarter of 2020:

Revenue was $153.5 million for an increase of 36% over the same quarter of 2019.
Net loss was $298.3 million representing $(0.74) per share. This is in contrast to LY net income of $15.2 million for $0.04 per share.
Adjusted net income was $32.2 million for the fourth quarter for $0.08 per share. This is up from $23 million for $0.06 per share year over year.
Prescription drug transaction revenue was $131.3 million for an increase of 26% over LY. Monthly active users increased 32% year over year.
Other revenue increased by 153% to $22.2 million.

Management

Co-founder and CEO Douglas Hirsch has also been on the board of directors since the company’s inception in 2011. He has served as Co-CEO since 2015. His previous experience includes senior positions at DailyStrength Inc., Yahoo!, and Facebook. Mr. Hirsh earned a B.A. in political science at Tufts University.

Co-founder and Co-CEO Trevor Bezdek is also on the board of directors. He also serves as CEO and President of two wholly-owned subsidiaries. His previous experience comes from senior positions at Tryarc, LLC, and Biowire. He earned a B.S. in biological sciences from Stanford University.

Competition: Amazon Pharmacy and Other Online Providers

An increasing number of online platforms are offering similar services to GoodRx. Most notably, Amazon launched its pharmacy services in November 2020. Other competitors include BestRx, GoodPx, Abacus Pharmacy, OptumPx, PioneerRx.

Early Market Performance

The underwriters priced the IPO at $33 per share. The stock opened on its first day of trading at $50.50. The price rose to $57.16 on October 6 then dropped precipitously to $33.76 on November 18. It rose again to reach %56.99 on February 10 only to decline again. Currently, the price trades in the $37 to $38 range.

Summary: Short GDRX ahead of IPO Lockup Expiration

When the GDRX IPO lockup expires, pre-IPO shareholders and company insiders will be able to sell millions of currently-restricted shares. An influx of shares to the market could cause a sharp, short-term dip in the GDRX share price.

Risk tolerant investors should consider shorting shares of GDRX either ahead of the IPO lockup expiration or early in the trading session on Monday March 22nd. Investors should cover positions during the March 23rd and 24th trading sessions.

This article was written by

Don Dion

12.67K Followers

Don Dion is the CEO of Inland Management, a company focused on acquiring, subdividing, developing and marketing large tracts of land on the fringes of major metropolitan markets. Inland Management has sold land in all 48 contiguous states totaling billions of dollars. As CEO, Don is responsible for helping to maintain and enhance the firm’s strong financial position and identifying opportunities for growth. In addition to his role at Inland Management, Don Dion is the Chief Investment Officer of DRD Investments, LLC. Based in Naples, FL. and Williamstown, MA., DRD Investments is a family office focused on managing a long/short hedge fund, real estate, venture capital and various other financial assets for the Dion family. Don also serves as the trustee of the Dion Family Foundation, which focuses on helping individuals with tuition assistance at Catholic Institutions for grammar school, high school, and college education. The foundation also helps individuals by supporting Massachusetts General Hospital. Don is on two leadership boards and advisory committees at Massachusetts General Hospital and the Home Base Program (a partnership between Mass General and the Red Sox Foundation). He consults with Saint Dominic's Academy and serves as a trustee of Saint Michael’s College. Previously, Don was the founder and CEO of Dion Money Management, a fee-based investment advisory firm for affluent individuals, families and non-profit organizations. Founded in 1996 and based in Williamstown, MA. and Naples, FL., Dion Money Management managed approximately one billion in assets for clients in 49 states and 11 countries. While at Dion Money Management, Don was responsible for setting investment policy, creating custom portfolios, and overseeing the performance of client accounts. Don sold the firm to NYC-based Focus Financial Partners (FOCS) on September 1, 2007 and no longer manages money for other families or institutions. Don remains a shareholder of Focus Financial Partners (FOCS). Don is also the retired publisher of the Fidelity Independent Adviser family of newsletters, which provided a broad range of investor commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With nearly 100 thousand subscribers in the United States and 29 other countries, Fidelity Independent Adviser published two monthly newsletters and one weekly newsletter. The flagship publication, Fidelity Independent Adviser, was published monthly for 16 years and reached over 60,000 subscribers. In 2011 Don and his daughter Carolyn co-authored the Ultimate Guide to ETFs, available on Amazon.com. Prior to founding Dion Money Management, Don co-founded Litchfield Financial Corp. (LTCH) with Summit Partners. Don served as Chairman and CEO of Litchfield, which was listed on the Nasdaq in 1992 and acquired by Textron Corp. (TXT) in 1999. Don was also the Executive Vice President, CFO and General Counsel for Patten Corporation (BGX) from 1986 to 1988, where he played a critical role in the company’s successful initial public offering on the New York Stock Exchange. From 1983 to 1985, Don was a corporate lawyer with the Boston Law Firm of Warner and Stackpole. Before joining Warner and Stackpole, Don worked as a C.P.A. for Ernst and Young from 1979 to 1983. Don graduated with honors from Saint Michael’s College in 1976 with a B.S. degree in Economics and Business Administration. He received his J.D. from the University of Maine Law School in 1979 and his LL.M. from Boston University Law School in 1982. Don can be reached at donalddion@gmail.com

Analyst’s Disclosure: I am/we are short GDRX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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