ZocDoc may accelerate IPO timing on TelaDoc, industry bankers say

Provided exclusively by Mergermarket

ZocDoc could accelerate plans for a potential initial public offering in the wake of Teladoc’s (NYSE:TDOC) successful listing, said three industry bankers. The New York City-based company has been touted in the banking industry as the next to follow TelaDoc into public markets as soon as this year.

Trading at USD 31.16 on Thursday, TelaDoc is up about 62% over its 1 July IPO price of USD 19, giving it a market cap of USD 1.15bn.

While ZocDoc’s decision to list might be informed by Teladoc’s performance, the two services have key differences, the first banker pointed out. TelaDoc provides online access to physicians who can diagnose and prescribe medication remotely, while ZocDoc provides an online booking system for patients to visit a brick-and-mortar doctor’s office. Teladoc presented in its roadshow a disrupter story to investors that ZocDoc might not fully be able to reproduce, the banker noted.

But the equity markets have recently been acting almost like venture capital firms, providing capital to innovative healthcare IT companies when they are often not yet cash-flow positive, said a fourth industry banker.

While the traditional healthcare-focused enterprise software space is dominated by a few established players, companies that provide novel ways to connect consumers and providers are seeing strong interest from investors. Appetite for these novel companies has allowed them to list at high multiples even when they generate little revenue, under the assumption that they will grow into their valuations over a few years, the banker said.

A spokesperson for ZocDoc declined to comment.

Founded in 2007, ZocDoc has raised close to USD 100m in three funding rounds. The company raised approximately USD 150m in a secondary offering last year, giving it an estimated valuation or USD 1.5bn, according to news reports. The company has investors such as Bezos Expeditions, DST Global, Founders Fund, Goldman Sachs and Khosla Ventures.

ZocDoc is not the only name in the subsector being watched for an IPO. Practice Fusion, which in 2013 added an online physician booking service to its offerings in direct competition with ZocDoc, has been speaking with JPMorgan about a possible IPO, according to a March report by this news service. Practice Fusion primarily focuses on offering free electronic medical records.

by Olga Oksman and Drew Singer

As seen in the mergermarket newsletter on 31/07/2015

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