SOC Telemed going public through 'blank check' acquisition

The company will join the Nasdaq with an initial valuation around $720 million.
By Jonah Comstock
03:20 pm
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SOC Telemed, formerly Specialists on Call, will join the Nasdaq stock exchange by merging with Healthcare Merger Corporation, a special purpose acquisition company. Sometimes referred to as a "blank check" acquisition, merging with a special purpose acquisition company is an alternate way for a company to go public.

The combined company will operate under the name SOC Telemed and will be listed with an initial value around $720 million. HCMC has $250 million in its trust account and private investors, including funds managed by BlackRock, Baron Capital Group, and ClearBridge Investments, among others, will make a $165 million private investment in the company concurrent with the merger. Additionally, SOC’s current management and equity holders, including majority stakeholder Warburg Pincus, will roll a portion of their equity into the new company. 

Proceeds from the acquisition will be used to pay down existing debt, purchase a portion of the equity owned by existing SOC shareholders, and capitalize the SOC Telemed balance sheet.

WHAT'S THE IMPACT?

SOC Telemed offers telemedicine technology and acute virtual care services to provider organizations. It serves 847 facilities, including 543 acute care hospitals in 47 states, and including 19 of the 25 largest U.S. health systems. The company claims to be the largest provider of acute neurology telemedicine and telepsychiatry. 

In the past few years it has made some acquisitions of its own, including behavioral health telemedicine company JSA in 2018 and NeuroCall in 2017.

Whether you think of this news as an IPO or as an acquisition (In truth it's a little bit of each.), it translates to more operating capital for SOC Telemed at a moment when, like many other telemedicine companies, it is seeing a booming business thanks to the COVID-19 pandemic. 

The news also coincides with a shakeup in the company's leadership team. Interim CEO Paul Ricci will step down when the deal is complete. CEO Steve Shulman, who also serves in a director role at HCMC, will become the chairman of the SOC Telemed board of directors, and John Kalix will be appointed the new CEO. Hai Tran will continue to serve as SOC Telemed's chief operating officer and chief financial officer. 

THE LARGER TREND

The first major telemedicine company to go public was Teladoc, which did so way back in 2015. Most of its competitors held off in the years since, but the upsurgence of COVID-19 has led to an opportunistic moment for telehealth companies eyeing the public markets. AmWell (formerly American Well) signaled in June its intent to have an IPO in September. Consumer wellness and telehealth company Hims is also considering a blank check acquisition, according to a recent Reuters report.

ON THE RECORD

"This business combination strengthens SOC Telemed and will allow it to further penetrate the broad and fast-growing acute telemedicine market,” Ricci said in a statement. “Telemedicine is at a pivotal moment as the country continues to navigate the COVID-19 crisis. As hospital leaders struggle with the problems of acute capacity management, physician scarcity and cost optimization, it has become clear that virtual care will continue to be a critical component of the healthcare industry’s ability to deliver better care to patients.”

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