Online therapy stocks continue to struggle despite impressive first quarter 

A global health crisis which brought major world economies to a grinding halt made online healthcare a marquee trade post the pandemic market. As telehealth boomed, digital health trade which was going through years of evolution got adopted in a matter of a few months.

Talkspace, is one such company that operates as a virtual behavioural online healthcare provider which offers mental health care solutions to its users over an encrypted mobile and web platform. Oren and Roni Frank founded the company after their marriage was saved through couples therapy.

Talkspace IPO-all you need to know 

Talkspace decided to go public with its initial public offering (IPO) by merging with a special purpose acquisition company (SPAC) with the help of Hudson Executive Investment Corp headed by Doug Bernstein. Trading on the NASDAQ stock exchange was to be done under TALK, its ticker symbol.

Over the past few years, Talkspace’s clientele grew rapidly, which helped the company in its fundraising ability to progress towards an IPO. Earlier too, Talkspace had gone through multiple rounds of funding from SoftBank, Spark Capital, Qumra Capital and Optum and overall found fundraising easy.

In early 2021, the merger valued at $1.4 billion, including debt, took place.The deal also included $300 million in investments through private entities like Jennison Associates and Woodline Partners among others.

What went wrong 

The downfall came about in November 2021 due to a combination of missteps in messaging and executing. Stocks started to tumble as shareholder rights law firms began investigating claims that company directors and other officers were violating federal security laws.

Talkspace, at the same time, presented its Q3 report in which the management professed that the earnings were far below their expectations. While the net revenue came to $26 million, a 23% increase over the corresponding period of last year, it showed a significant decline from the $32 million which was initially projected.

Even the current consensus from Talkspace analysts shows revenue for 2022 declining to $156 million from the forecast amount of $196 million.

As a result, in a tumultuous two weeks, three key executives of Talkspace resigned, including Mark Hirschhorn, the President & Chief Operating Officer. This happened a week after its co-founder and CEO, Oren Frank, along with head of clinical services Roni Frank had relinquished their charges.

After the 2021 Q3 report came up short in sales,Talkspace stocks shrank 36% in a single day. This was a loss of almost half its market value in just two weeks. The rout was complete after the leadership exodus, and the disappointing quarterly results announced on Nov 15, 2021.

The company’s valuation, which was pegged at $1.4 billion at the time of going public, is now capped at less than a quarter of that amount at $334 million.

What lies ahead 

The future of Talkspace seems uncertain. Virtual healthcare is hotting up and still trending, but when industry leaders stumble, it reflects on everyone else as well. That said, the company presented a fairly positive 2022 Q1 report, and Talkspace reviews are still positive

Investors are worried about putting in more money in a company running on makeshift management. Even though the Franks will remain on the board as strategic advisors for six months, there is no clear message of who will take charge after that.

While the turmoil at Talkspace hasn’t deterred investors in funding mental health care companies elsewhere, experts are concerned whether the venture backed digital health platforms will be able to deliver what they promise.

The main concern of the wellness startups which have been funded with venture dollars is what happens to the customer should any of them fail.

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