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% since report
Spruce Point Capital Management
July 2023
Short Thesis
~90 Pages
Short Thesis
Hims & Hers Health $HIMS: Celebrity-Fueled E-Commerce Masquerading as Healthcare
Spruce Point alleges HIMS operates on shaky legal ground, sells commoditized products at massive premiums, and has failed to deliver on virtually every growth initiative pitched to investors since its SPAC IPO.
"HIMS is a marketing gimmick for some very basic, very old services."
— Former HIMS Executive, Spruce Point Interview
Price Target
$5.20–$6.50
Downside Risk
25%–40%
ED Rev. Exposure
>50%
Est. Yr 1 Churn
>50%
Market Cap
$1.6B
Avg. Consult Time
~5 min
AMG Owners
Only 2
Investment Thesis
Key Allegations
Corporate Practice of Medicine Structure
Estimated Customer Retention
Competitive Landscape
Supply Chain Red Flags
Former Employee & Physician Testimony
Failed Growth Promises
Hims & Hers Health is an e-commerce company selling commoditized generic medications at massive premiums, structured to generate high-volume prescriptions rather than provide credible healthcare services.
Despite blistering 88% revenue CAGR since 2020, Spruce Point alleges the Company operates its physician network on shaky legal ground vis-à-vis Corporate Practice of Medicine provisions, faces existential risk from OTC ED alternatives, has failed to deliver on virtually every growth initiative, and misrepresents core business metrics including customer churn and acquisition costs.
⚖️
CPoM Violations
HIMS' "Friendly PC" structure may violate Corporate Practice of Medicine provisions. Physician "owners" are figureheads with no equity, voting rights, or financial claims. HIMS controls medical practice despite regulatory disclosures claiming otherwise.
💊
OTC ED Threat
FDA-approved OTC ED treatment Eroxon eliminates the need for a HIMS prescription in a category estimated at over 50% of revenue. Core revenue model fundamentally threatened.
🏥
Dubious Care Model
Average consultations estimated at under 5 minutes. Mostly asynchronous, check-the-box affairs. Founding medical director received disciplinary action for "gross negligence" before co-founding troubled Cerebral.
🔗
Supply Chain Exposure
Key pharmacy partner Truepill faces DEA investigation. ITC Compounding forced to shut down by FDA. Curexa received three FDA inspection letters. Fareva hit with EPA violations.
📉
Churn Misrepresented
Spruce Point estimates over 50% of customers churn by year 1 and nearly 80% by year 2. HIMS deflects by quoting a "long-term retention rate" that only captures year 2 to year 3 performance.
🎯
Failed Growth Initiatives
Health system partnerships with no economic substance. Abandoned insurance market pursuit. Enterprise offering vanished. International inflated. Wholesale revenue turned negative. Women's platform poorly rated.
The "Friendly PC" Structure Spruce Point Believes Is On Shaky Ground
HIMS (NYSE: HIMS)
→
H&H Healthcare Mgmt (MSO)
→
Affiliated Medical Groups
(Bailey → You Health → Human Health)
(Bailey → You Health → Human Health)
Admin fees flow up · "Exclusive medical authority" claimed by AMGs · HIMS' own accounting disclosures contradict this claim
2 Physician "Owners"
Williams & Powell manage 600+ docs
Williams & Powell manage 600+ docs
→
1099 Contractor Physicians
Part-time, non-exclusive, high turnover
Part-time, non-exclusive, high turnover
→
Customers / Patients
Primarily young men seeking ED pills
Primarily young men seeking ED pills
Restrictive stock transfer agreements give HIMS effective control · Physicians have zero equity or voting rights
Spruce Point Estimated Cumulative Customer Churn
End of Year 1
>50% Churned
>50%
End of Year 2
~80% Churned
~80%
HIMS "Long-Term Retention" (Yr 2→3 only)
~16% of value
16%
HIMS Premium Pricing vs. Competitor Alternatives
Hims (Premium Priced)
Highest
$HIMS
Ro Health
Growing Faster
Ro
Cost Plus Drugs (Mark Cuban)
Disrupting
Cost Plus
Amazon Pharmacy / Clinic
Massive Scale
Amazon
Eroxon (OTC — No Rx Needed)
FDA Approved
OTC Threat
| Pharmacy Partner | Status | Key Issue |
|---|---|---|
| Truepill (PostMeds) | ✗ Under Investigation | DEA Order to Show Cause for unlawful dispensing of controlled substances; mass layoffs |
| ITC Compounding | ✗ Facility Shutdown | FDA inspection found violations "injurious to health"; forced temporary facility closure |
| Curexa (EHT Pharmacy) | ✗ 3 FDA Letters | Below-strength products, sloppy operations, facility structural concerns across three inspections |
| Fareva | ✗ EPA Violations | Virginia air violation (Jan 2023) and EPA civil enforcement order (2021) for hazardous waste |
| Apostrophe (In-house) | ✗ Limited Capacity | Contracts with both ITC and Truepill; modest internal capabilities; not FDA-registered |
On Physician Ownership
"I wish...no, none of that. There was no equity in the PC. The PC was basically worthless from a financial perspective. In practicality, the PC owner really doesn't do anything. It's just kind of a figurehead."
— Former HIMS Physician
On HIMS as a Healthcare Company
"There's a fundamental lack of healthcare expertise, like really fundamental deep healthcare expertise. I'd say that three people at HIMS had real healthcare expertise, but no one seemed really interested in any of their input."
— Former HIMS Executive
On Prescription-Driven Metrics
"Those success metrics are around number of prescriptions. Providers exist to prescribe first, which means they're looking for symptoms and then prescribing, which leads to horribly misaligned incentives."
— Former HIMS Executive
On The Target Customer
"Their customer is the 25 to 35 year old that drinks too much on the weekends and still wants to be able to perform. I know that really sounds tongue in cheek, but that is the customer."
— Former HIMS Executive
| Initiative | Status | Outcome |
|---|---|---|
| Health System Partnerships | ✗ No Substance | Ochsner, Mount Sinai, Privia, Carbon Health deals have no economic substance; marketing puffery |
| Insurance Market Entry | ✗ Abandoned | After two years of investor guidance, HIMS acknowledged it will not pursue insured customers |
| HIMS for Enterprise | ✗ Vanished | Pitched in SPAC presentation; never mentioned again in subsequent filings or calls |
| International Expansion | ✗ Inflated | Tiny UK acquisition grossly overstated; no coherent strategy for different regulatory landscapes |
| Wholesale / Retail | ✗ Declining | Despite Target, Walmart, GNC puffery — wholesale revenue growth turned negative |
| Women's Health (Hers) | ✗ Poor Reviews | 78% 1-star ratings on Trustpilot vs. 14% for Hims; platform ill-suited for women's conditions |
| In-house Pharmacy (100%) | ✗ Missed Target | Promised 100% by YE 2022; only reached ~60% by Q1 2023 with 80% goal for YE 2023 |
Company Profile & Downside Estimate
Company
Hims & Hers Health
Ticker
NYSE: HIMS
Market Cap
$1.6B
Founded
2017
IPO
Jan 2021 (SPAC)
Rev. CAGR (2020–)
88%
Core Products
ED, Hair Loss, Derm
Cash Flow
Elusive
Spruce Point Price Target
$5.20
to
$6.50
25%–40% downside from report date. Additional downside if state or federal regulators take action against HIMS' CPoM structure.
57%
ED Revenue
Sexual Health
(Last Disclosed 2020)
(Last Disclosed 2020)
~80%
By Year 2
Est. Cumulative
Customer Churn
Customer Churn
Key Players
Andrew Dudum
CEO & Co-Founder
Listed as owner/manager of early Bailey Health entities — a potential CPoM violation. Pitches HIMS as "front door to healthcare" while physicians walk their dogs during consultations.
Ho Anh, MD
Founding Medical Director
Received CA Medical Board disciplinary order for "gross negligence" related to telehealth before joining HIMS. Later co-founded Cerebral (DOJ/FTC investigations).
Dr. Brian Williams
AMG "Owner" — All You Health Entities
Graduated from Caribbean medical school with questionable accreditation. Received complaints for practicing outside specialty. One of only two "owners" managing 600+ physicians.
Steven Powell
AMG "Owner" — All Human Health Entities
LinkedIn lists three other jobs but does NOT mention his role at HIMS. Human Health of Nebraska registration suspended in home state; revoked in Arkansas.
Dr. Laura Purdy
Former AMG Owner — You Health Entities
Claims to work for "more than 50" telehealth providers. Self-styled "America's Favorite Doctor." LinkedIn shows 26+ simultaneous positions while at HIMS.
Melissa Baird
Former COO
Directly emailed prescription duration guidance to physicians — a potential CPoM violation. Compared drug prescription changes to website design changes.
From the Report
"HIMS is effectively making those decisions. The owner of the PC is the one that would ultimately fire or not fire, but the conversation inside of HIMS is we had to fire this provider."
— Former HIMS Executive on hiring control
"People don't even speak to physicians. There's an incredibly detailed logic system that intakes these people. That system was effectively making the decision for the provider."
— Former HIMS Executive on automated care
"The front door of healthcare has always been, and will always be, primary care providers doing primary care provider stuff."
— Former HIMS Executive on Dudum's vision
Hims vs. Hers Trustpilot Ratings
Hims (Men) — 1-Star
14%
14%
Hers (Women) — 1-Star
78%
78%
Women using the Hers platform report dramatically worse experiences — a warning sign for category expansion.
Data Privacy Red Flags
Not HIPAA Covered
HIMS explicitly states it is not a "covered entity" under HIPAA in its terms and conditions.
HIMS explicitly states it is not a "covered entity" under HIPAA in its terms and conditions.
Customer Indemnification
Customers must indemnify HIMS against all legal liabilities arising from use of its services.
Customers must indemnify HIMS against all legal liabilities arising from use of its services.
Ad Targeting with Health Data
The Markup/STAT investigation found mental health and sexual health user data sent to Facebook and Snap for ad targeting.
The Markup/STAT investigation found mental health and sexual health user data sent to Facebook and Snap for ad targeting.
2017–2019
Bailey Health Entities Formed
Original AMG entities incorporated under Bailey Health name. CEO Dudum, President Levy, and Co-founder Spector listed as owners on some entities — a clear CPoM concern.
November 2019
Triple Point Loan Document References HIMS Ownership
Venture debt agreement with Triple Point explicitly states Bailey entities were "owned" by HIMS — contradicting the "physician-owned" CPoM requirement.
November 2020
SEC Forces Enhanced CPoM Disclosure
Following review of S-4 filing, SEC issues comment letter requiring HIMS to dramatically expand its disclosures regarding the Friendly PC structure and CPoM provisions.
January 2021
SPAC IPO via Oaktree Acquisition Corp
HIMS goes public. Had sandbagged projections at 30% YoY growth. Revenue CAGR since 2020 hits 88%, but cash flow remains elusive.
2021–2022
Bailey → You Health → Human Health Transition
All Bailey Health entities dissolved and replaced with new You Health and Human Health entities — potentially to address CPoM violations in original structure.
December 2022
DEA Investigation of Truepill Launched
DEA issues Order to Show Cause against Truepill for unlawful dispensing of controlled substances linked to Cerebral. Truepill undergoes mass layoffs.
June 2023
FDA Approves OTC ED Treatment (Eroxon)
Eroxon approved for over-the-counter sale — consumers no longer need a HIMS prescription for ED treatment. Core revenue stream of >50% directly threatened.
Spruce Point Capital Conclusion
E-Commerce, Not Healthcare: A Premium Multiple Built on Shaky Foundations
▼ Short Position
Spruce Point sees 25%–40% downside ($5.20–$6.50) in HIMS shares, with potentially greater losses if state or federal regulators act against its Corporate Practice of Medicine structure. The Company sells commoditized generics at massive premiums, misrepresents churn and acquisition cost metrics, has failed to deliver on every major growth initiative, and faces existential competitive threats from OTC alternatives and large-scale entrants like Amazon Pharmacy.
⚖️
CPoM Regulatory Action
State or federal enforcement against the Friendly PC structure could fundamentally impair the HIMS business model.
💊
OTC ED Competition
FDA-approved OTC ED treatments eliminate the need for HIMS prescriptions in its largest revenue category.
📉
Multiple Compression
Premium e-commerce valuation unsustainable as revenue growth decelerates and competitive threats materialize.
🔗
Supply Chain Collapse
DEA investigation of Truepill and FDA violations at ITC/Curexa threaten pharmacy operations comprising ~40% of fulfillment.
🏷️
Price Compression
Cost Plus, Amazon, Walmart, and generic alternatives force margin erosion on commoditized products sold at premiums.
🔄
Hidden Churn Crisis
Estimated 80% cumulative churn by year 2 requires unsustainable marketing spend to maintain growth.