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HIMS

FTC sues HIMS over data privacy, deceptive billing and cancellation barriers; shares plunge 12-13%

Sources (6)

On 29 Jul the FTC, together with Utah and California, formally sued Hims & Hers in federal court, turning a 3-year investigation into a real lawsuit. The 3 charges (data privacy violations, deceptive billing and cancellation barriers) go straight to the weak spot of the subscription business model and to the trust that underpins the Labs data-flywheel

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narrative. With the Q2 results on 10 Aug just 12 days away, the suit will weigh on sentiment going into earnings. This is a civil case, not an existential threat, but the tail risk is now out in the open. At about $27 the shares are 27% below the $37 high. The analyst consensus target is $30.15, leaving only 3% upside, so risk/reward is neutral, leaning cautious.

Key evidence

  • The FTC, Utah and California (represented by the Los Angeles County Counsel) sued Hims & Hers in federal court on 29 Jul
  • Charge 1, data privacy violations: through website tracking pixels and customer-list uploads, sensitive health information (which conditions they have) on about 2.5 million subscribers was shared with third-party advertising platforms such as Meta and Snap
  • Charge 2, deceptive billing: ads promised a 'free consultation' or '$0 today', but once users had filled in the intake form and a doctor had written a prescription, they were charged immediately and signed up to auto-renewing subscriptions, with no chance to review
  • Charge 3, cancellation barriers: the cancel button was hidden, making it hard for users to cancel their subscriptions
  • The result of an FTC investigation lasting nearly 3 years, and an enforcement action by its newly formed healthcare task force
  • HIMS shares plunged 12-13% on 29 Jul to about $27.30
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  • HIMS's official response: the lawsuit ignores the evidence from 3 years of investigation and twists the law to grab headlines; the company will fight it vigorously
  • On 7 Jun Senator Jim Banks had already written to the FTC asking it to investigate HIMS's advertising, pricing and subscription refund practices: the tail risk has now come into the open
  • At least 2 data-breach class actions were already on record as of 2 May: privacy problems are piling up
  • With the 10 Aug Q2 results only 12 days away, the lawsuit weighs on sentiment ahead of earnings
  • Valuation: at about $27, the shares are down about 27% from the early-July high of $37
  • The analyst consensus target was cut from $30.69 to $30.15 (13 analysts). Of the 18 covering analysts, 4 rate it Buy, 12 Hold and 2 Sell, keeping the consensus at Hold, with only about 3% upside
  • 23-24 Jul FDA PCAC peptide advisory committee: 8-6 with 1 abstention, recommending 6 of the 7 peptides for the 503A compounding list (including BPC-157, KPV and TB-500; only Emideltide was rejected). A positive binary outcome, but now overshadowed by the FTC lawsuit

Catalysts to watch

  • 10 Aug Q2 results: only 12 days away, with the lawsuit weighing on sentiment
  • Progress of the FTC case: civil litigation that could drag on for years, with injunctions and fines as remedies
  • HIMS's defence strategy in court and subsequent litigation disclosures
  • If HIMS is forced to overhaul its subscription and cancellation flows, conversion and retention metrics would come under pressure

Risks

  • Risk to the core of the business model: the deceptive billing and cancellation-barrier charges go straight at the subscription engine
  • User trust, the foundation of the Labs data-flywheel narrative, has been shaken
  • Privacy problems are piling up (existing class actions plus the FTC suit), and public criticism keeps building
  • With the suit landing 12 days before earnings, the valuation will struggle to recover in the short term
  • The analyst target is only $30.15, with 3% upside; risk/reward is neutral, leaning cautious
  • The tail risk has come into the open, escalating from a senator's pressure letter to a federal lawsuit

Sources 6

  1. Complaint text on the FTC website
  2. HIMS official response (X and press release)
  3. Senator Jim Banks, 7 Jun letter to the FTC
  4. Record of data-breach class actions, 2 May
  5. FDA PCAC 23-24 Jul peptide advisory committee vote
  6. Analyst consensus (18 covering analysts)

A brief is a lead for our research, not a verified conclusion or advice.