Hims & Hers faces securities probe after FTC suit, down 14.7%

Kessler Topaz Meltzer & Check opened a securities investigation into Hims & Hers Health on Aug. 12, widening legal pressure after the FTC sued the telehealth provider, sending shares down 14.7 percent.

"The lawsuit disregards substantial evidence we provided the FTC during its nearly three-year investigation," a Hims & Hers representative said, vowing to "vigorously defend" against the claims.

Shares fell $4.32, or 14.73 percent, to close at $25.00 on July 29, the day the FTC and the states of Utah and California filed their complaint in U.S. District Court for the Northern District of California. The stock recovered 2.44 percent to $27.70 on Friday, leaving it 0.7 percent above its 100-day moving average of $27.51 but 9.8 percent below its 50-day average of $30.72 and 14.9 percent below its 20-day average of $32.54.

The legal exposure lands as Hims & Hers guides to second-quarter revenue of $680 million to $700 million, above the $642.95 million consensus, with adjusted EBITDA of $35 million to $55 million. The company posted a first-quarter loss of 40 cents a share, missing the 4-cent estimate, on revenue of $608.1 million.

FTC alleges billing and data-sharing violations

The FTC complaint accuses Hims & Hers of charging consumers for prescriptions before medical consultations occurred, enrolling them in recurring subscriptions without approval, making cancellation difficult, and sharing sensitive health information with Meta Platforms Inc. and Snap Inc. despite representing the data would remain private. The filing cites the FTC Act, the Restore Online Shoppers' Confidence Act, the Utah Consumer Sales Practices Act, and California's False Advertising and Unfair Competition Laws.

The company, which has described itself as the leading health and wellness platform since 2017, said customers possess the information needed to make informed decisions about their care and that patient data is used strictly for providing care under its Privacy Policy. Management said it has strengthened its systems as it has grown.

Eight firms join the probe

Kessler Topaz joins Lowey Dannenberg, Kirby McInerney, Kaplan Fox & Kilsheimer, Schall, Brown & Schwartz, The Law Offices of Frank R. Cruz, Holzer & Holzer, and Bragar Eagel & Squire in investigating potential securities law violations. The firms are soliciting investors who bought Hims & Hers securities and suffered losses.

The investigation compounds a market reassessment of risk. Analyst targets range from $33 to $40, with Canaccord Genuity's Maria Ripps holding the highest at $40, Barclays' Glen Santangelo at $39, B of A Securities' Allen Lutz at $37, and JP Morgan's Cory Carpenter cutting to $33. The accuracy rates of these calls, from 53 percent to 69 percent, show the uncertainty around the stock's near-term direction.

If the FTC's findings support viable securities fraud claims, Hims & Hers could face liabilities that erode the $35 million to $55 million adjusted EBITDA it projected for the second quarter. If the company prevails, the stock could reclaim the $30.00 resistance level it lost in the selloff. The shares have returned 31.83 percent annually over the past five years, a run that leaves little room for legal overhang.

This article is for informational purposes only and does not constitute investment advice.