Teladoc Faces Class-Action Lawsuit for Allegedly Misleading Investors

Teladoc Health is facing a class-action lawsuit alleging the telehealth company misled investors about its business and prospects.

The suit was filed in US District Court for the Southern District of New York on behalf of all people and entities who purchased Teladoc securities between Oct. 28, 2021, and April 27, 2022.

According to the complaint, brought by shareholder Jeremy Schneider, the company, its CEO and CFO made “materially false and misleading statements” about increased competition that was negatively impacting Teladoc’s BetterHelp mental health and chronic care businesses. The suit claims that as a result, growth of those businesses was less sustainable than Teladoc had led investors to believe, and the company’s revenue and adjusted EBITDA projections for fiscal year 2022 were unrealistic.

Teldaoc Health maintains that the allegations are not factual.

“Unfortunately, lawsuits like this one have become commonplace for public companies,” a Teladoc Health spokesperson said via email. “There is no factual basis to the suit whatsoever, but we otherwise can’t comment further on pending litigation.”

Per its most recent earnings report, the company’s full-year guidance for 2022 revenue ranged from $2.4 to $2.5 billion and adjusted EBITDA from $240 and $265 million. These figures were far lower that prior estimates provided in its full-year financial statement for fiscal year 2021, which included a range of $2.5 to $2.6 billion for 2022 revenue and adjusted EBITDA from $330 to $355 million.

Further, Teladoc Health had to recognize a non-cash goodwill impairment charge of $6.6 billion related to its 2020 acquisition of Livongo Health. An impairment charge is a process by which companies write off assets whose value drops or is lost completely. Soon after, Teladoc shares plunged by 37 percent, according to MarketWatch.

The impairment charge also drove a net loss per share of $41.58 in the first quarter of fiscal year 2022.

“On a conference call with investors and analysts [on April 27] to discuss Teladoc’s Q1 2022 results, Defendants largely attributed the Company’s poor performance, revised FY 2022 guidance, and $6.6 billion non-cash goodwill impairment charge to increased competition in its BetterHelp and chronic care businesses,” according to Bragar Eagel & Squire, P.C., a stockholder rights law firm that is prosecuting the legal action on plaintiffs’ behalf.

But the company has dismissed competition in the past, guaranteeing investors that it had a “dominant market position in the industry,” the law firm stated.

Competition in the telehealth arena has been heating up, with several companies jostling to get a piece of the increasingly profitable pie.

Earlier this year, Amazon added three new businesses to the lineup of companies offering its virtual care service to their employees, and Walmart acquired multispecialty telehealth provider MeMD last year.

Teladoc Health has attempted to cement its position in the industry through various technology partnerships, including collaborations with Microsoft and Amazon.

Shortly before its disappointing first quarter financial results were reported in April, the company announced a new partnership with Northwell Health.