Amwell exploring $200M buyout of online therapy provider Talkspace: media report

Shares of online therapy company Talkspace jumped 40% Monday on news that telehealth provider Amwell is exploring a buyout.

Reports of a possible deal come as Talkspace's shares have plummeted amid financial struggles and key executives leaving the company.

Talkspace shares jumped 40% Monday after a report in Israeli business publication Calcalist over the weekend that Amwell (formerly American Well) was in discussions to buy the company for $1.50 per share, which reflects a value of only $200 million. Talkspace went public last summer through a merger with SPAC Hudson Executive Investment Corp. in a deal that valued the company at $1.4 billion, including debt. 

That deal made Talkspace the first publicly traded virtual behavioral health company, providing it with $250 million in cash to be used as growth capital.

The price tag for the potential acquisition represents a 150% premium over Talkspace's share price of 60 cents per share at Friday's close, Calcalist reported.

A spokesperson for Talkspace declined to comment on the media report. Amwell could not be reached for comment.

A possible deal comes after Seeking Alpha in June reported that Talkspace received but declined a buyout approach from Amwell. Talkspace rejected Amwell's expression of interest before any numbers were discussed, according to a person familiar with the company's operations at the time.

Talkspace connects users with licensed therapists via video chat or text. Co-founded by Roni and Oren Frank in 2012, Talkspace promotes behavioral health as a lifestyle, not as a one-time event. The company provides access to an extensive network of certified, credentialed and professional clinicians through two channels: direct-to-consumer and enterprise.

In its most recent earnings report, Talkspace reported that it had approximately 86 million lives covered by employer or healthcare insurance agreement as of September 2022.

But the company's stock has fallen 92% since its initial listing in June 2021.

Talkspace's two founders, CEO Oren Frank and head of clinical services Roni Frank, stepped down from their roles last fall and the digital health company's chief operating officer was pushed out. The company also has been hit with a securities fraud lawsuit and has been accused of misleading investors before it went public last year by misrepresenting its financials and growth.

Namely, the class-action suit filed Jan. 7 alleges Talkspace failed to disclose critical growth headwinds, including increased advertising and customer acquisition costs and worsening growth and gross margin trends, and overvalued its accounts receivable from certain health plan clients.

Since the beginning of the year, Talkspace has lost $61 million on revenues of $89 million, reflecting an increase of only 6% compared to the corresponding period in 2021.

The company has already conducted an extensive round of layoffs and estimates that it will make additional cuts in the current quarter as well to stop the bleeding, Calcalist reported.

A potential acquisition of Talkspace also come after a Seeking Alpha report in late September that a largest investor was pushing for the company to appoint a permanent CEO and take steps to help stabilize the company's faltering share price.

Picking up Talkspace could build out Amwell's virtual mental health capabilities.

In a note, Truist analyst Jailendra Singh said Talkspace's B2B business could be relatively more attractive asset for Amwell as the company should be able to generate some revenue synergies from the combination given their payer relationships across the two companies, Seeking Alpha reported.

On Nov. 18, Talkspace received a warning letter from the Nasdaq stock exchange notifying the company that, for the previous 30 consecutive business days, the bid price of its stock closed below the minimum $1 per share requirement, putting it in danger of being delisted, according to a U.S. Securities and Exchange Commission filing.