Despite Impressive Headlines, Is Teladoc Diluting Its Future?
Of all the deals Warren Buffett has made, he considers the measly $433 million purchase of Dexter Shoe Co. in 1993 the worst. It wasn't the amount he spent on the company that upset him. It was the fact that he used Berkshire Hathaway shares. The shares he used to fund that purchase are now worth 20 times what they were in 1993. In other words, in Buffett's mind, that acquisition cost him $8.7 billion.
Companies often use their stock to make acquisitions in order to conserve cash to pay for growth. It's the same reason many executives in tech end up with a lot of stock options and restricted stock in the company they work for. A fast-growing company needs to plow every bit of cash it can into growing the business. Vendors don't accept stock as payment for office space, servers, and sales conferences. Teladoc Health (NYSE: TDOC) fits the description of a rapidly growing company using its stock to fuel growth through acquisition. It's been doing it for years, but has it gone too far?
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Source Fool.com
