- Last week, a New York district judge dismissed a class-action lawsuit against virtual care company Teladoc alleging that the company misled investors regarding its business operations, resulting in losses and damages for stakeholders.
- A group of investors led by shareholder Jeremy Schneider sued Teladoc in June 2022 for failing to disclose challenges including increased competition in the virtual care sector and its struggling financial performance resulting from its $18.5 billion acquisition of Livongo in October 2020. Teladoc recorded a more than $13 billion non-cash goodwill impairment charge last year due to the acquisition.
- Judge Denise Cote of the Southern District of New York ruled that Teladoc had detailed risks of the potential acquisition and that, while the company may have expressed “optimism” regarding its standing against competitors, the company did not falsify facts or statements, adding that “expressions of optimism are not generally actionable.”
The lawsuit against Teladoc claimed significant losses and damages resulting from “defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the company’s securities.” The lead plaintiff accused Teladoc, along with CEO Jason Gorevic and CFO Mala Murphy, of inflating its stock price between Feb. 11, 2021 and July 27, 2022 and violating federal securities laws. It called for damages to be paid to stockholders.
The plaintiffs believed Teladoc presented an “unjustifiably positive picture” of the Teladoc-Livongo deal and “downplayed rising competition within the virtual healthcare industry,” according to the court order. Teladoc bought Livongo as part of its strategy to become a virtual multispecialty clinic.
In the July 5 opinion, however, Cote noted that several documents filed by Teladoc between Feb. 2021 and July 2022 detailed the risks of the deal, including a 10-K and registration statements.
“We may have difficulty integrating the Livongo business, and the anticipated synergies and other benefits of the combined company may not be realized,” Teladoc stated in its March 2021 Form 10-K.
The judge said that Teladoc was simply expressing optimism in its statements, citing an interview CEO Gorevic participated in with CNBC.
“In that interview, Gorevic discussed the growing competition in the telehealth industry and spoke optimistically about ‘the market demand and consumer demand for unified integrated solutions,’” Cote wrote.
Teladoc did not respond to a request for comment.