Healthcare company Hims & Hers Health HIMS went public via SPAC merger in 2021. Since then, the company has announced partnerships with Miley Cyrus and Rob Gronkowski in efforts to market its products.
After seeing shares up in 2023, a short seller is attacking the company’s legal structure and business practices.
What Happened: Short Seller Spruce Point Capital is out with a fresh report on Hims & Hers Health, alerting investors of several red flags found in the company. The report follows Spruce Point's challenge to a stock that was skyrocketing due to its connections to the artificial intelligence sector.
Hims & Hers provides treatments for erectile dysfunction as its two primary products. The company has also expanded into dermatology, mental health and women’s health.
“We believe the image of its business presented to investors does not match reality and the fundamental changes to ED medication now becoming FDA approved for OTC sales are increasingly likely to thwart its revenue growth,” Spruce Point said.
The short seller calls into question the operations of Hims & Hers that could risk “legal and business repercussions.”
“HIMS positions itself as the ‘front door’ to the healthcare system, with deep customer relationships and a platform that will scale to provide a broad range of medical treatments.”
Spruce Point says the reality is the company’s platform is a “quick and easy outlet” and the physician consultations used are “check-the-box affairs” that give Hims & Hers questionable medical credibility.
“We find it troubling that HIMS’ early clinical guidelines were developed by a physician sanctioned by the Medical Board of California who went on to co-found controversial start-up Cerebral.”
Sharing slides from the short report, Spruce Point offered up a tweet highlighting the problems they perceive for the company.
“The competitive landscape is daunting, especially when you have no cost advantage. No differentiation, no price advantage.”
Benzinga reached out to Hims & Hers for comment and will update the story if a comment is received.
Related Link: Hims & Hers Lands Miley Cyrus, Could The Stock Be A Party In The USA
What’s Next: Spruce Point gives some credit to Hims & Hers in the report.
“Giving credit where it is due, HIMS has grown revenue at an 88% CAGR since 2020 and, unlike many of its de-SPAC peers, has greatly exceeded its highly conservative (or sandbagged) SPAC transaction revenue forecasts,” Spruce Point said.
Spruce Point sees competition coming against Hims & Hers, which alongside the potential legal issues could send shares much lower.
“Despite its growth, we believe that HIMS has failed to execute on just about every expansion opportunity it has pitched to investors since its IPO, while vastly reducing key performance indicators once touted by management.”
Spruce Point also sees high marketing spend from the company hurting its financials, which could see “true profitability continue to suffer.”
The short seller sees a downside risk of $5.20 to $6.50 for shares.
HIMS Price Action: Investors brushed off the short report, with shares of Hims & Hers up 5.31% to $9.12 on Thursday.
Shares of Hims & Hers are up 69% in the last year and up 45% year-to-date in 2023.
Read Next: What 6 Analysts Have To Say About Hims & Hers
Photo: Shutterstock
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
