The booming special purpose acquisition company (SPAC) market shows no signs of slowing down in 2021 with another big digital health deal announced this week.
Online therapy app Talkspace plans to go public through a merger with SPAC Hudson Executive Investment Corp. The combined company will operate as Talkspace and intends to be listed on the Nasdaq under the symbol "TALK."
The deal values Talkspace—which connects users with licensed therapists via video chat or text—at $1.4 billion, including debt. The deal will provide the company with $250 million in cash to be used as growth capital, the companies announced Wednesday.
The transaction is expected to close late in the first quarter or early in the second quarter of 2021.
Once the transaction closes, Talkspace will be the first and only publicly traded virtual behavioral health company.
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Private tech companies have been looking to merge with a SPAC or blank check company as a nontraditional route to going public rather than a typical IPO. With the IPO market rattled by COVID-19 and wild volatility, it has become a more attractive way to go public.
There has been an increasing number of technology-focused blank check companies issued in recent months, including SOC Telemed, Hims & Hers, Clover Health, Augmedix and Butterfly Network.
Former Livongo executives who didn't make the jump to Teladoc are backing a new blank check healthcare technology company and are preparing an IPO of up to $500 million.
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.
Talkspace has seen robust user growth, with approximately 46,000 active members and more than 39 million lives covered by employer or healthcare insurance agreements. Like many digital mental health providers, Talkspace has seen accelerated growth during the COVID-19 pandemic as the health crisis drives up stress levels and exacerbates existing mental health issues.
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In the U.S. alone, it is estimated that more than 70 million people suffer from some form of mental illness and that less than half of people with a behavioral illness receive care because of cost, lack of access or stigma, according to Talkspace.
"Roni and I started Talkspace nine years ago to establish a next-generation technology company, exclusively focused on behavioral health, with the mission of opening up access to mental healthcare, improving clinical outcomes, and helping those in need live happier and healthier lives," said Oren Frank in a statement.
"Today, this mission is more important than ever before. We are proud of the positive impact Talkspace has made and are excited for the next phase in the company's journey. Hudson Executive's experience and relationships in healthcare, expertise in capital markets, and alignment with our mission will be invaluable as we continue to grow, innovate and improve mental health outcomes," Frank said.
Douglas Braunstein, founder and managing partner of Hudson Executive Capital, said Talkspace is a purpose-built technology company designed to meet the unmet medical needs in behavioral health by improving access, decreasing costs, improving outcomes and creating value for patients, providers and employers.
For 2021, Talkspace's estimated net revenue is $125 million, up approximately 69% from 2020 estimated net revenue.
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Roni and Oren Frank will continue to lead Talkspace, along with the company's president, chief operating officer and chief financial officer Mark Hirschhorn. Following the closing, Braunstein will serve as chairman of the company's new board of directors.
The transaction will be funded with Hudson Executive Investment's $414 million of cash in trust, a $25 million forward purchase from Hudson Executive Capital and an additional $25 million committed by Hudson Executive Capital to backstop redemptions. The transaction is further supported by an oversubscribed $300 million fully committed private investment in public equity at $10 per share anchored by leading investors including the Federated Hermes Kaufmann Funds, Jennison Associates LLC, Woodline Partners LP and Deerfield.
J.P. Morgan Securities LLC acted as lead financial adviser, and Jefferies acted as financial adviser to Talkspace. Latham & Watkins LLP acted as legal counsel to Talkspace.
Citigroup Inc and J.P. Morgan Securities LLC acted as capital markets advisers and placement agents. Citigroup acted as financial adviser, and Milbank LLP acted as legal counsel to Hudson Executive Investment Corp.