Talkspace faces class action alleging it misled investors ahead of SPAC

telemedicine company Talkspace is facing a class-action lawsuit alleging that it misled investors about the company’s financials in the lead-up to its merger with a special purpose buyout firm.

The lawsuit, filed on January 7, alleges that investors were not informed that Talkspace was seeing significantly increased advertising costs in its direct-to-consumer business, and was seeing lower conversion rates than those ads. The class action also alleges that the company increased customer acquisition costs and lowered demand in its consumer business more than was disclosed to investors, and that its income was inflated from its deals with health plans.

A Talkspace spokesperson wrote to MobiHealthNews.

why does it matter

In January 2021, Talkspace He announced plans to go public through a merger with Hudson Executive Investment Corp. The deal closed six months later, allowing the company to grow $250 million in capital.

But the mental health company has struggled financially since then. Opening day share price was recorded at $8.90; Today’s prices are hovering around $1.50 per share.

Talkspace co-founder and CEO Oren Frank and co-founder and chief clinical services officer Ronnie Frank resigned from their positions in November, the company announced. “Disappointing” third-quarter results.

About a week later, President and Chief Operating Officer Mark Hirschhorn He resigned after an internal review of his behavior in connection with an off-site corporate event.

Big trend

Virtual Mental and Behavioral Health is a hot space in digital health and painting Lots of investor interest. There are a variety of companies aiming to rethink mental health care in the digital age, including Headspace Health, SonderMind, Lyra Health, Modern Health, and a variety of other players.

Hit the public markets by SPAC is also a trend among digital health and health technology companies. Last year, digital therapeutics company Pear Therapeutics, children’s technology company Owlet, digital health chat software Babylon, clinical trial platform Science 37, and consumer genetics company 23andMe hit public markets with SPAC deals.

However, many health tech companies are not doing well after their IPO, According to a report by Silicon Valley Bank. It noted that de-SPAC’s performance was -23% in the healthcare industry in general, and -44% in the health technology sector.

“The huge valuation premiums we saw in the private market for health technology did not translate to the public market,” the report’s authors wrote.

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