Co. Behind BetterHelp Hit with Securities Class Action Over Financial Projections, Growth Statements

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The owner of online counseling service BetterHelp faces a proposed class action that alleges investors were injured financially as the result of materially false and misleading statements that downplayed competitive headwinds anticipated by the company. 

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The 22-page lawsuit against Teladoc Health, Inc. and its CEO and CFO alleges the defendants made false and/or misleading statements and/or failed to disclose that increased competition, among other factors, was harming both BetterHelp and Teladoc’s chronic care businesses. In that light, the suit also alleges the defendants were not forthcoming to investors about the fact that the growth of the businesses was not as sustainable as they had been led to believe. 

Due to the foregoing, the suit relays, investors were unaware that Teladoc’s revenue and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) projections for 2022 were unrealistic, and that the company would as a result be forced to recognize a significant non-cash goodwill impairment charge. 

The lawsuit claims that Teladoc and its top officers have run afoul of the federal Securities Exchange Act. 

Per the filing, Teladoc, among other representations, assured investors in a U.S. Securities and Exchange Commission filing in February 2022 that the company would maintain its “dominant market position and unique competitive strengths.” The defendants also propped BetterHelp as at the forefront of the direct-to-consumer therapy market, and insisted that the company’s chronic care programs were one of the “key components” of Teladoc’s virtual care platform that would drive greater engagement and increase revenue, the lawsuit relays. 

According to the complaint, the truth began to emerge when Teladoc issued an April 27, 2022 press release announcing its Q1 2022 financial results. Per the case, the company reported revenue of $565.4 million, which missed consensus estimates by more than $3 million, and net losses of more than $41 per share, driven primarily by a non-cash goodwill impairment charge of $6.6 billion, or $41.11 per share. Moreover, Teladoc revised its fiscal year 2022 revenue guidance, dropping it to $2.4 to $2.5 billion from previous guidance of $2.55 to $2.65 billion, the lawsuit says. 

In a conference call with investors and analysts that same day, Teladoc CEO Jason Gorevic explained in prepared remarks how increased competition, lower growth and lower yield from marketing spend were harming BetterHelp’s financial results, the complaint states. Gorevic followed up these remarks by stating how increased competition and other factors were negatively impacting Teladoc’s chronic care businesses, and added that BetterHelp had played an outsized role in necessitating Teladoc’s revised guidance for fiscal year 2022, according to the filing. 

On April 28, investor news outlet Seeking Alpha published a report that stated Teladoc shares had “lost more than a third of value to reach a 52-week low on Thursday after the telehealth company missed Street forecasts for its 1Q 2022 revenue,” which promoted many analysts to downgrade the stock, the lawsuit relays. 

Upon this news, Teladoc’s stock price fell $22.48 per share, or 40 percent, to close at $33.51 per share on April 28, the case says. 

“As a result of Defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the Company’s securities, Plaintiff and other Class members have suffered significant losses and damages,” the suit charges. 

The lawsuit looks to represent all persons and entities who bought or otherwise acquired publicly traded Teladoc securities between October 28, 2021 and April 27, 2022. 

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