GigCapital2 DD: Merging with UpHealth and Crowdbreak

GigCapital2 (GIX) is merging with BOTH UpHealth and Cloudbreak Health. It will become UpHealth and trade under the ticker UPH. Currently only $10.30.

UpHealth themselves say that this will create ‘the only integrated profitable global digital health company’.

What is UpHealth?

UpHealth is a group of MedTech companies, including Thrasys and MedQuest Pharmacy, and is one of the largest providers of digital health services in the world.

‘With its combinations, UpHealth is positioned to reshape healthcare across the continuum of care by providing a single, integrated platform of best-in-class technologies and tech-enabled services essential to personalized, affordable, and effective care.’ - BusinessWire.

UpHealth, after the merger, will have 4 main service lines:

  • Integrated care management - ‘population health solutions for patients with complex medical, behavioral health, and social needs’
  • Global telehealth - ‘digitally enabling the continuum of care with award-winning digital primary care and specialty consultations globally’
  • Digital pharmacy - ‘full service ePharmacy delivering compounded and manufactured medications’
  • Behavioural health - ‘tech-enabled services rapidly digitizing mental health and substance abuse’

UpHealth is already generating $115 million revenue in 2020, with EBITDA of $13 million.

In 2021, UpHealth is expected to generate over $190M in revenue and $24M in EBITDA; 69% of the 2021 incremental revenue growth is already contracted. This is 65% revenue growth and 85% EBITDA growth. They’re predicting 74% revenue CAGR from 2020 - 2022.

UpHealth already has contracts with healthcare providers, insurers, and payers in all 50 states and also 9 other countries, with 1800+ US healthcare venues enlisted.

The need for MedTech related services has really become apparent via Covid. The ability to have consultations and other related services without coming into direct contact is very desirable.

What is Cloudbreak?

BusinessWire: Cloudbreak Health revolutionized patient and provider communication with the introduction of video remote interpreting (VRI), establishing Cloudbreak as a pioneer in telehealth technology. Cloudbreak Health continues to innovate with Cloudbreak Telehealth Solutions, including telepsychiatry, telestroke, tele-quarantine, remote patient monitoring and other specialties. Committed to overcoming healthcare disparities and bringing language access to the point of care, Cloudbreak Health seamlessly integrates their language access solution, Martti, into a host of platforms, including Epic, Zoom, and Caregility. Performing more than 1.5 million minutes of telemedicine consultation each month on over 14,000 video endpoints at 1,800+ healthcare locations nationwide, Cloudbreak Telehealth simplifies how providers care for patients, putting a full care continuum at their fingertips 24/7.

“Combining with UpHealth and its complementary suite of solutions will further our ability to power healthcare’s digital transformation and resolve disparities on a massive scale. We are proud to be part of this mission together.” – Jamey Edwards – CEO & Co-Founder of Cloudbreak Health

Basically, Cloudbreak will give UpHealth another string to its bow but UpHealth was already an enticing enough prospect.

UpHealth management team:

Dr. Chirinjeev Kathuria - Co-Chairman and Co-Founder. Has an MBA from Stanford, also MD from Brown. Previously co-founded NightHawk, which eventually went public.

Al Gatmaitan - Co-CEO. Served as COO of IU Health, which is a top 25 health system.

Martin Beck - CFO. Ex JP Morgan Healthcare Banker.

Other information:

Enterprise value of merged company: $1.35 billion. At this valuation UpHealth only has a 6.9x revenue multiple. Compare that to other MedTech companies such as GoodRx (20x), Teladoc (19.1x), or Hims (8.9x), UpHealth is looking relatively cheap.

Expected closing date: 1st quarter 2021.

Currently trading at: $10.30. Make sure you buy GIX not GIK!

Only thing left to do is for the GIX stockholders to vote on the proposal (which will go through). That’s why it hasn’t popped yet. The time to jump in is now, before the vote.

Next GigCapital2 shareholder meeting: 8th December. This is likely when the vote will be, and so is the catalyst for all future price movement. Get in before then.

Why I believe this is a good play:

  • It’s targeting a rapidly growing industry which is boosted my megatrends like increasing elderly population
  • UpHealth is already profitable, making it less speculative than other SPAC plays.
  • High revenue visibility
  • Currently trading near NAV.
  • Vote upcoming = catalyst
  • It’s a merger of 3 companies, which is cool.

Positions: Shares in GIX. This does not constitute financial advice.


Thank you for sharing your research.

Why is this still trading so close to NAV if the target is so good?

1 Like

Typically price starts to move after the stockholders vote on it, not after the target has been announced.

Take a look at APXT’s price movement. They announced about 23rd November, price movement started on the 25th. Same thing could be happening here.