The talks are currently underway around a price of $1.50 per share of Talkspace, which reflects a value of only $200 million for a company issued through SPAC at a value of $1.4 billion in the summer of 2021. This is apparently a 150% premium over the low price at which Talkspace is currently trading on the Nasdaq (60 cents per share), but in fact it is only slightly more than the value of the cash in the company’s coffers, which reached 150 million dollars at the end of the third quarter. The transaction will be paid in American Wall shares, which itself fell from a value of almost 10 billion dollars at its peak last year, to a value of 1 billion dollars where it is traded today on the New York Stock Exchange (NYSE). American Wall stated that the company does not respond to rumors. Talkspace’s response could not be obtained until the close of the issue.
If the deal is indeed signed, it will be about the destruction of almost 90% of value in less than two years. American Wall already tried to purchase Talkspace a few months ago, at a value of about 450 million dollars, but the negotiations blew up. Also, the MINDPATH company from California was also interested in Talkspace and was willing to pay a similar price. What may push the deal this time is, among other things, the warning letter Talkspace received last Wednesday from the Nasdaq stock exchange, where it is traded, in which it is warned against being delisted from trading, this is because the company’s stock has been trading below the price of one dollar for three months, which means that it does not meet the basic threshold conditions for trading on the technology-biased stock exchange. However, in the past, Talkspace’s board of directors rejected proposals, some of which were not bad, certainly considering the current state of the company. At the beginning of November, it also finally appointed a permanent CEO, after operating under a temporary CEO For a whole year, since the removal of CEO and co-founder Oren Frank.
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Although most of the activity of Talkspace, which employs about 500 people, is concentrated in the USA, where most of its employees are also employed, the Israeli saver also has exposure to the company due to the holding of the investment house Meitav and the insurance company Migdal. Meitav invested 3 million dollars in the company in 2017, At the time, Stockspace raised $31 million led by the Kumara Capital fund, and it realized half of the holding at the time of the offering at a significant profit. Today, the investment house owns less than 5% of the company’s shares. Migdal Insurance owns 2 million shares of Talkspace. Along with Meitav and Migdal Insurance, funds also The Israeli venture capital companies Komra Capital and Firstim have holdings of about 5% each in the company.
Talkspace’s sad story is an illustration of the peripheral damage of the spike phenomenon that does not only amount to losses for investors, but also seriously damages the company itself and its business. SPAC, an acronym for Special Purpose Acquisition Company, is actually a company that issues and raises funds only to merge private companies into it within a specified period of time – usually two years. If the SPAC fails to complete a transaction within this period of time, the company returns the money to the investors plus interest. During 2020-2021, the phenomenon gained unprecedented momentum in the US, and the fundraising volumes of the SPACs reached dizzying numbers. To illustrate, in 2021, 613 SPAC issuances were carried out in which 162 billion dollars were raised – approximately 2 times compared to the previous year. Due to the changes in the macroeconomic environment , chiefly the rising inflation and the interest rate that is rising in order to fight it, the phenomenon has waned dramatically this year (83 issues in which only 13.2 billion dollars were raised), and many companies are returning the funds to investors.
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Talkspace is a prime example of a company that was prematurely issued and is now prematurely liquidated, all because of greed. The company for providing remote psychological treatment was established ten years ago by the couple Roni and Oren Frank. The idea was excellent. During Corona, it flourished in particular, and then purchase offers began to flow to the company according to a value of 700 million dollars, and even 800 million dollars, from insurance companies and companies in the field of psychological treatment and remote medicine, who recognized the good technology and the thirsty market, even if the business model had not yet been fully developed The end. In the first phase, Talkspace was mainly based on the private customers, but quite quickly the understanding began to seep in that the high customer acquisition costs, and the constant need for a huge investment in advertising, would make it difficult to reach a profit. While the highly accomplished Olympic swimmer Michael Phelps was recruited for its advertising campaign, Talkspace had already started talking about moving to the business market and selling the product to employers who would give it as a benefit to employees.
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Doug Braunstein, the entrepreneur who issued the Spak that merged with Talkspace
(Photo: Bloomberg)
In the rush after the exit, it seems that the funds missed, or perhaps ignored, the past of Doug Braunstein – the one who was the head of the Spak company that proposed that Talkface merge with it – who was indeed formerly a vice president of the major US bank JP Morgan, a detail that was emphasized on by the spac, but in recent years he heads the Hudson hedge fund, which is considered a quite activist and aggressive fund.
Thus, for example, Braunstein’s foundation waged a well-publicized fight against Deutsche Bank in 2018. A year later, in 2019, Braunstein led a fight to replace the board of directors at USA TECHNOLOGIES, after reaching a 16% stake in the company, which he eventually won, received eight seats on the board and led a process of changing the company’s name and rebranding. At the beginning of 2021, a gathered struggle began around a company called EHEALTH which was also attacked at the same time by the Starboard Fund, another activist fund known for its aggressiveness, and which recently entered a significant position in the Israeli WIX. Given this past, no one should have been particularly surprised that Braunstein would lead a move to replace Talkspace’s entire management, including the founding couple, as indeed happened shortly after the merger was completed and Talkspace became a public company.
Today, of course, the same funds that sold adequate packages of shares no longer want Shaman to be associated with a talkspace event. Now is the problem of the small investors who bought the goods on the basis of the numbers given in the presentations presented before the company went public. Although in the traditional photo from the opening of trading in the NASDAQ stock, quite a few of the faces of the investors in Talkspace can be recognized, today they are out of the picture.
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Ronnie and Oren Frank, founders of Talkspace. The couple were forced out of the company only five months after the IPO
(Photo: talkspace)
Thus, for example, the prominent Israeli investor, the Komra venture capital fund, which already recouped its investment in Skandari, which was part of the offering, refused to answer Calcalist’s questions regarding the future of Talkspace, even though it still owns about 5% of the company’s shares, as appears from submitted documents to the American Securities and Exchange Commission (SEC). The other investors in TalkSpace are mainly foreign funds. The first investor in the company, the Israeli Firsttime Fund of Ilan Shiloh (owner of the McCann-Ericson advertising agency that Oren Frank previously headed), Yonatan Ben Artzi and Nir Tarlovsky, which invested for the first time in TalkSpace According to a value of only 5 million dollars, he has not yet given up completely, and is trying to fight the Spak people in an attempt to convince them to accelerate the change of business focus of Talkspace and to appoint a CEO. A few months ago, the foundation, which still owns about 5% of the company’s shares, sent a letter in its name and in the name of several other shareholders to the board of directors demanding to appoint a permanent CEO urgently and to present a strategic plan for the future.
A week ago, Talkspace announced the appointment of John Cohen as CEO, in what may seem like a last-ditch attempt to stabilize the company. But this may actually indicate that Brownstein simply has more interesting activist goals in today’s Wall Street. The day after the appointment, the two Talkspace’s financials revealed a lack of growth alongside a jump in losses. Since the beginning of the year, it has lost $61 million on revenues of $89 million, reflecting an increase of only 6% compared to the corresponding period in 2021. These numbers are very far from the projections for revenues of $200 million in 2022 that were given in the optimistic presentations presented before the merger with the SPAC. The company has already conducted an extensive round of layoffs and estimates that it will make additional cuts in the current quarter as well to stop the bleeding in cash.
Talkspace’s story can teach entrepreneurs quite a bit about the behind-the-scenes of the most glamorous start-ups, as Talkspace was somewhere in 2020, and even more about what goes on in the spacious meeting rooms of the venture capital funds that determine their fate.
In the case of Talkspace, this is not just another story of a fall in the stock, but what appears to be a story of a takeover, at first apparently of a voluntary nature, by the Spak people over the company, and later it moved to more hostile lines. Right now, everyone on Talkspace is at odds with everyone else and meanwhile the company is fading. The founders are no longer there, having been sent home just five months after the IPO. Braunstein, who served as the chairman and initiator of the SPAC, was appointed interim CEO after the retirement of the Israeli couple, while recruiting his wife Samra Braunstein to the position of VP of Marketing at Talkspace. Later, Michael Hirschhorn, the VP of Operations who was slated to be appointed CEO, was also pushed out Later on. The official reason for sending Hirschhorn home is particularly juicy – Braunstein’s people claimed that Hirschhorn got into a fight with Berman during a company event. Hirschhorn’s history of problematic conduct also worked against him, after he was forced to resign from the position of CFO at TELADOC, One of the biggest players in the remote medicine market, who was also interested in buying TalkSpace in the past, following an affair he had there with one of the employees.
The sad part of Talkspace’s dismal story – which could have become a significant arm in the activity of a company like TELADOC, if it had been educated to choose a sales deal that stood up to itself when it is a promising company with a value of 700-800 million dollars – lies not only in the great loss to the investing public, but also in what is seen Like a story of Spock that complicated a company that developed an important product of public health value, which could have also translated into a lot of money. To illustrate, American Wall itself recently estimated that the potential market for remote mental health care may reach $52 billion, a forecast that clarifies the amount that investors in Talkspace could receive for their shares, if it had not reached its current state.