Shares of Hims & Hers Health (NYSE:HIMS) tumbled 11.9% to $25.83 on Tuesday following the news that the Federal Trade Commission (FTC) had filed a lawsuit against the telehealth company. The complaint alleges that Hims shared customer data with major advertising platforms without proper consent, and that it engaged in deceptive billing practices. The sharp sell-off erased approximately $800 million from the company's market capitalization, based on preliminary intraday data.
The stock's decline was company-specific rather than sector-wide. Rival telehealth providers such as Teladoc Health (NYSE:TDOC), LifeMD (NASDAQ:LFMD), and American Well (NYSE:AMWL) saw only minimal changes in their share prices, suggesting that investors are focused on Hims' unique exposure to regulatory and operational risks.
FTC Allegations and Company Response
The FTC's complaint centers on allegations that Hims shared customer lists and website event data with Meta Platforms (NASDAQ:META), Snap (NYSE:SNAP), and other advertising networks, despite promising users that their personal health information would remain private. The agency also claims that the company charged customers shortly after they submitted intake forms, often without any provider consultation, and that cancellation controls were difficult to find.
Hims has denied the allegations, calling the lawsuit “not enforcement grounded in consumer protection.” CEO Andrew Dudum has previously described the platform as offering “personal, data-driven care,” but the case now places the handling of that data under direct legal scrutiny.
Customer Acquisition Costs Under Pressure
The lawsuit comes at a time when Hims' marketing spending is already a significant factor in its financial profile. In the first quarter, the company spent $192.8 million on customer acquisition, which represented 31.7% of its total revenue. Total marketing expenses reached $222.0 million, or 36.5% of revenue. While the company linked 9% subscriber growth to increased marketing-driven traffic, the cost of acquiring new customers remains a closely watched metric.
Subscribers reached 2.584 million in the first quarter, but monthly revenue per average subscriber fell 6% to $80. The combination of rising acquisition costs and declining per-user revenue underscores the challenges the company faces in sustaining profitable growth.
Data Privacy Risks
Hims had previously warned in regulatory filings that tighter data privacy rules could weaken its targeted advertising capabilities. The company noted that tracking-related claims might force operational changes or require it to discontinue certain marketing strategies. The FTC lawsuit now brings those risks to the forefront, potentially raising the cost of compliance and limiting the effectiveness of its customer acquisition engine.
The case is still in its early stages, and the outcome remains uncertain. A court could reject the FTC's allegations, but an injunction, financial penalties, or reputational damage could still raise acquisition costs and weaken customer retention.
Upcoming Earnings and Investor Focus
The next major test for Hims comes on August 10, when the company is scheduled to report second-quarter results after the closing bell. Management has guided for revenue in the range of $680 million to $700 million and adjusted EBITDA between $35 million and $55 million. Investors will be closely watching customer acquisition costs, cancellation rates, and revenue per subscriber to gauge whether the legal challenges are already having a tangible economic impact.
With the stock down sharply and the FTC lawsuit adding uncertainty, Hims & Hers faces a critical period as it balances growth ambitions with regulatory scrutiny. The August earnings report will provide the first concrete evidence of how the company is navigating these headwinds.
