Judge dismisses class-action lawsuit against Teladoc

A federal judge dismissed a securities class-action lawsuit filed against virtual care company Teladoc Health pertaining to its $18.5 billion merger with chronic care company Livongo. 

The complaint, originally filed by shareholder Jeremy Schneider in 2022 on behalf of parties that purchased Teladoc shares between Feb. 2021 and July 2022, alleged the virtual care company’s representatives misled investors by downplaying the challenges it faced integrating Livongo after it acquired the chronic care company. 

The suit also claimed the company’s misleading statements “artificially inflated the price of Teladoc’s stock” during those 17 months. 

Teladoc filed a motion for dismissal, and on Wednesday, U.S. District Judge Denise Cote in New York granted the motion closing the case. 

The judge cited Teladoc’s S-4 registration statement filed with the U.S. Securities and Exchange Commission in connection with the Livongo merger as part of the reason for the dismissal. 

In the SEC filing, the virtual care company reported, “Combining the business of Teladoc and Livongo may be more difficult, costly or time-consuming than expected,” and “the failure to integrate successfully the businesses and operations of Teladoc and Livongo in the expected time frame may adversely affect the combined company’s future result.”

THE LARGER TREND

Teladoc’s stock gradually increased following its acquisition of Livongo, from around $81 in 2020 to a height of $223 in 2021. It’s since plummeted and is now trading around $23 per share. 

The company posted a revenue boost of $629.2 million in the first quarter of 2023, an 11% increase from $565.4 million in the first quarter of 2022. Its net loss was $69.2 million, or $0.42 per share, compared with $6.7 billion, or a loss of $41.58 per share, in Q1 2022. 

Revenue for the virtual care giant’s direct-to-consumer mental health division BetterHelp grew 21% year-over-year while paying users increased 22%. Revenue from the company’s enterprise integrated care segment also grew by 5%.

In January, the company announced layoffs of about 300 employees, or about 6% of its non-clinician workforce, as part of a larger restructuring plan to reduce operating costs.

In a letter to staff, CEO Jason Gorevic said the company was cutting roles made redundant by its 2020 merger with Livongo. He also said the virtual care giant was focusing on sustainable revenue growth and profitability. 

Teladoc announced today it would post its second quarter 2023 earnings on July 25.