SOC Telemed (NASDAQ: TLMD), one of the earliest health tech SPACs [TTA 4 Aug 2020], is going private in a deal with the Sand Hill Road healthcare investment firm Patient Square Capital. Patient Square is paying $3 per share in cash.
Based on the 100,840,000 shares outstanding (MarketWatch), this Editor’s best estimate of the transaction is about $303 million. Holders of 39% of the outstanding shares have already voted in favor of the transaction. The deal includes a 30-day “go shop” period in which SOC Telemed’s board of directors can solicit additional bids. Unless there is a superior bid, the deal with Patient Square is expected to close in the second quarter of 2022.
According to the release, Dr. Chris Gallagher, CEO since September of 2021 will remain. He was previously co-founder/CEO of Access Physicians, a multi-specialty acute care telemedicine business acquired by SOC Telemed in March of 2021. SOC Telemed claims to be the largest telemedicine provider in the US acute care market, supplying virtual consults in specialty areas such as neurology, psychiatry, and ICU.
Here is where it gets interesting–and worrisome for telehealth. SOC Telemed’s SPAC in August 2020 started at $10.00 per share and a valuation of $720 million. On 2 February, two days before the announcement, SOC Telemed was trading at $0.64 per share. That is a plunge of 94% from the SPAC, with a 72.6% drop in the prior three months that was only arrested by the buyout. The reality is that the Patient Square offer represents a 368% premium over SOC Telemed’s closing share price on 2 February. It is currently trading in about the $2.75 range.
The worrisome trend is that since August, the publicly traded and established industry giants, Teladoc and Amwell, have also taken it in the shins on their share prices. Teladoc has tumbled by half and Amwell (American Well) by 60%. Even the private companies like MDLive and Included Health (Grand Rounds + Doctor on Demand) must take note that telehealth consults have plunged to about 4% of claims. SPACs, which had opened up an alternate, less complicated channel of public financing for health tech and had its own role in inflating company valuations, have faded due to a combination of circumstances. Will more cautious investments and fewer IPOs be the trend in telehealth for 2022?