Talkspace’s stock recently recorded a jump of 40% after a reported buyout offer from Amwell (NYSE:AMWL) in spite of the price offered being just half what was offered to the company hardly a month ago.
Talkspace, an online therapy company based in New York, is likely to accept this new offer from Amwell after previous key employees were let go for rejecting higher offers.
While TALK shares closed at 60 cents per share on November 25, it is set to open at 86 cents per share, while the reported purchase offer is $1.50 per share. This is after Talkspace debuted at $8.90 per share after it went public in 2021 after a $1.40 billion SPAC deal.
Will Amwell bail out Talkspace?
If the merger between Amwell and Talkspace comes through, it will be a rescue act for Talkspace as it has since been sent a notice for failure to satisfy a continued listing rule by the department of the NASDAQ Stock Market.
In pursuant of the Bid Price Rule, the company was notified that for the last 30 consecutive days, the bid price of Talkspace’s common stock had closed below the minimum $1.00 per share requirement for continued listing in the NASDAQ Capital Market.
In accordance with the Listing Rule, Talkspace has 180 calendar days, or up to May 17, 2023 to regain compliance with the bid, which means that the company’s stock should close at $1.00 or up for ten consecutive business dates prior to the compliance date of May 17.
The situation for Talkspace took a turn for the worse on November 8, 2022, when the company reported a loss of about $18 million on a revenue of $29.30 million for the quarter ending September 2022.
Just after the quarterly results were made public, Doug Braunstein, who had stepped in as interim CEO for one year, was replaced by Joel Cohen.This after exactly a year since Doug Braunstein let go co-founders Oren and Roni Frank after more poor results.
Less than two weeks after Joel Cohen stepped in, Chief Operating Officer Mark Hirschhorn was shunted out on the basis of an internal report on his conduct, with little explanation. His responsibilities are presently being taken care of by the executive team of Talkspace. This is the second round of high-profile departures from the company.
Firstime Ventures, an Israeli investment company, which had put in a lot of money in Talkspace, complained in September that Braunstein failed to follow up on good acquisition offers, possibly on a merger with Amwell.
If true, this would be the second time this once popular virtual therapy company has rejected a potential suitor in Amwell. Behavioral Health Business also reached out to the representatives of Talkspace but is yet to hear from them also.
Another talks about a deal with Mindpath Health were said to be on the anvil at the end of May 2022, but till date no deal has materialized even though Mindpath Health indicated a share range of $2.50 to $3.00 per share, which would have actually resulted in a significant consideration of $465 million.
C’Tech, an industry publication, slammed Talkspace and charged them with ” value destruction created by greed for a big and quick exit”. It further said, while the original offers of both Amwell and Mindpath were more or less similar at $450 million, the current offer of Amwell is only $200 million.
What next?
The two largest shareholders in Talkspace are Northwest Venture Partners, a San Francisco based venture firm and Hudson Executive Capital LP, a New York City based investment group. According to the documents available with the Securities and Exchange Commission, each of the two above firms hold a 9.50% stake in Talkspace.
Additionally, the interim CEO Doug Braunstein also happened to be the founder and managing partner of Hudson Executive Capital. Three other firms, Goldman Sachs Inc, Spring Capital LLC, and Revolution Growth Management Company together hold a 17% stake in the company.
It is now more than likely that the Amwell deal will go through as investors are demanding for the same and those who are against it are being made to let go.
The only question remains whether the deal will close at the offer price of $1.50 per share, or whether the buyer will find reasons to press it down even further.
