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What Is LEAA Health Technologies?
Vancouver, Canada-based LEAA Health Technologies Corp. (LEAA:CA) was founded to develop a network of healthcare service providers to offer premium at-home or in-office medical tests and services to patients.
Management is headed by co-founder, Chief Executive Officer Isaak Yakubov, who has been with the firm since inception and was previously a physician assistant.
The company’s other co-founder is Chairman Eli Ofel.
LEAA currently has 2 employees and 5 independent contractors and also seeks to acquire the remaining interest in LEAA US operations that it does not currently own.
As of December 31, 2021, LEAA Health has booked fair market value investment of $10.5 million as of December 31, 2021 from investors.
According to a 2022 market research report by Grand View Research, the U.S. market for medical concierge services was estimated at $5.5 billion in 2021 and is forecast to reach $13.3 billion by 2030.
This represents a forecast CAGR of 10.3% from 2022 to 2030.
The main drivers for this expected growth are a desire for patients for easier access to medical care and a preference among some doctors for such types of less price-sensitive patients.
Also, the chart below shows the historical and projected U.S. medical concierge market trajectory:
U.S. Concierge Medicine Market (Grand View Research)
Major competitive or other industry participants include:
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MDVIP
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Signature MD
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Crossover Health
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Specialdocs Consultants
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PartnerMD
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Concierge Consultants & Cardiology
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Castle Connolly Private Health Partners
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Peninsula Doctor
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Campbell Family Medicine
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Destination Health
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Priority Physicians
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U.S. San Diego Health
LEAA Health’s IPO Date & Details
The initial public offering date, or IPO, for LEAA Health has not yet been announced by the company or its agent.
(Warning: Compared to stocks with more history, IPOs typically have less information for investors to review and analyze. For this reason, investors should use caution when thinking about investing in an IPO, or immediately post-IPO. Also, investors should keep in mind that many IPOs are heavily marketed, past company performance is not a guarantee of future results and potential risks may be understated.)
LEAA Health intends to raise $5 million in gross proceeds from a Canadian IPO of 8.33 million subordinate voting shares offered at a proposed price of $0.60 per share.
The offering is not being marketed to U.S. investors and no US SEC filings have been made. It is solely being offered according to Canadian securities regulations.
No existing shareholders have indicated an interest to purchase shares at the IPO price.
Assuming a successful IPO, the company’s enterprise value at IPO would approximate $25.8 million, excluding the effects of underwriter over-allotment options.
The float to outstanding shares ratio (excluding underwriter over-allotments) will be approximately 16.31%. A figure under 10% is generally considered a ‘low float’ stock which can be subject to significant price volatility.
Management says it will use the net proceeds from the IPO along with its existing working capital as follows:
Product development costs, including app and interface improvements $451,000
Systems implementation and business process improvements $77,000
General and administrative expenses $2,155,000
Investor relations $180,000
Product advertising and marketing costs $2,118,000
Unallocated working capital $577,329
Total: $5,558,329
* Based on the Bank of Canada daily exchange rate on June 30, 2022 of US$1.00 – C$1.2886.
(Source – SEDAR)
Management’s presentation of the company roadshow is not available.
Regarding outstanding legal proceedings, management says the firm is not a party to any legal proceedings or regulatory actions.
The agent of the IPO is Canaccord Genuity.
How To Invest In The Company’s Stock: 7 Steps
Investors can buy shares of the stock in the same way they may buy stocks of other publicly traded companies, or as part of the pre-IPO allocation.
Note: This report is not a recommendation to purchase stock or any other security. For investors who are interested in pursuing a potential investment after the IPO is complete, the following steps for buying stocks will be helpful.
Step 1: Understand The Company’s Financial History
Although there is not much public financial information available about the company, investors can look at the company’s financial history in their SEDAR filings (Source).
Step 2: Assess The Company’s Financial Reports
The primary financial statements available for publicly-traded companies include the income statement, balance sheet, and statement of cash flows. These financial statements can help investors learn about a company’s cash capitalization structure, cash flow trends and financial position.
My summary of the firm’s recent financial results is below:
The company’s financials have shown a small amount of topline revenue, operating profit and 16.1% operating margin and positive cash flow from operations for the nine months ended December 31, 2021.
Free cash flow for the nine months ended December 31, 2021, was $499,292.
Advertising & Promotion expenses as a percentage of total revenue were 43.7% in the last three quarters of 2021; its Advertising & Promotion efficiency multiple was 2.3x in the same period.
The firm currently plans to pay no dividends and to retain any future earnings for reinvestment back into the company’s growth initiatives.
LEAA’s Q2 – Q4 2021 CapEx expenditures indicate it has spent substantially on capital expenditures as a percentage of its operating cash flow.
Step 3: Evaluate The Company’s Potential Compared To Your Investment Horizon
When investors evaluate potential stocks to buy, it’s important to consider their time horizon and risk tolerance before buying shares. For example, a swing-trader may be interested in short-term growth potential, whereas a long-term investor may prioritize strong financials ahead of short-term price movements.
Step 4: Select A Brokerage
Investors who do not already have a trading account will begin with the selection of a brokerage firm. The account types commonly used for trading stocks include a standard brokerage account or a retirement account.
Investors who prefer advice for a fee can open a trading account with a full-service broker or an independent investment advisor and those who want to manage their portfolio for a reduced cost may choose a discount brokerage company.
Step 5: Choose An Investment Size And Strategy
Investors who have decided to buy shares of company stock should consider how many shares to purchase and what investment strategy to adopt for their new position. The investment strategy will guide an investor’s holding period and exit strategy.
Many investors choose to buy and hold stocks for lengthy periods. Examples of basic investing strategies include swing trading, short-term trading or investing over a long-term holding period.
For investors wishing to gain a pre-IPO allocation of shares at the IPO price, they would ‘indicate interest’ with their broker in advance of the IPO. Indicating an interest is not a guarantee that the investor will receive an allocation of pre-IPO shares.
Step 6: Choose An Order Type
Investors have many choices for placing orders to purchase stocks, including market orders, limit orders and stop orders.
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Market order: This is the most common type of order made by retail traders. A market order executes a trade immediately at the best available transaction price.
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Limit order: When an investor places a buy limit order, they specify a maximum price to be paid for the shares.
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Stop order: A buy-stop order is an order to buy at a specified price, known as the stop price, which will be higher than the current market price. In the case of buy-stop, the stop price will be lower than the current market price.
Step 7: Submit The Trade
After investors have funded their account with cash, they may decide an investment size and order type, then submit the trade to place an order. If the trade is a market order, it will be filled immediately at the best available market price.
However, if investors submit a limit order or stop order, the investor may have to wait until the stock reaches their target price or stop-loss price for the trade to be completed.
The Bottom Line
LEAA is seeking Canadian public investment to fund the expansion of its U.S. growth initiatives.
The market opportunity for providing medical concierge services in the U.S. is large and expected to grow at low double-digit rates through 2030, so the firm enjoys strong industry growth dynamics in its favor.
However, there appear to be numerous competitors, so the company faces a growing competitive landscape.
Canaccord Genuity is the agent and there is no data on IPOs led by the firm over the last 12-month period in the U.S. Canaccord may have been more active in the Canadian IPO market, but I have no performance return information in that regard.
The primary risks to the company’s outlook are its tiny size and thin capitalization in relation to the large U.S. market with growing competition.
As for valuation, management is asking investors to pay an EV/Revenue multiple of 13.9x trailing revenues.
Given the company’s tiny size, thin capitalization and fragmented competition, my outlook on the LEAA IPO in Canada is a Hold.
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