Hims & Hers Health: Governance Failures and the Erosion of Investor Trust

The recent collapse of Hims & Hers Health, Inc. (HIMS) as a viable telehealth player underscores a critical lesson for investors: corporate governance failures can swiftly erode trust and decimate valuations. Over the past year, the company has faced a perfect storm of legal, regulatory, and reputational crises, culminating in two securities class actions and a derivative lawsuit. These events highlight the fragility of investor confidence when governance lapses intersect with high-stakes business decisions.

Governance Failures: A Recipe for Disaster

At the heart of the lawsuits lies a pattern of alleged mismanagement and misrepresentation. Hims & Hers' partnership with Novo Nordisk, announced in April 2025, initially seemed to validate its business model. The collaboration allowed the company to sell Wegovy, a blockbuster weight-loss drug, alongside compounded semaglutide products. However, the FDA's April 2025 announcement that the Wegovy shortage had been resolved rendered the mass compounding of semaglutide illegal under Section 503A/503B. Despite this, Hims & Hers continued to market compounded versions as “personalized” alternatives, a practice Novo Nordisk deemed deceptive.

The board and CEO Andrew Dudum allegedly failed to disclose these regulatory risks to investors. Internal communications, later cited in lawsuits, suggest the company knew Novo Nordisk was unhappy with its compounding practices but continued to tout the partnership as stable. This lack of transparency violated fiduciary duties and contributed to a 34.6% stock price drop in June 2025 after the partnership's termination.

Legal Implications: A Multi-Pronged Attack

The securities class actions (Sookdeo and Yaghsizian) and the derivative suit (Jones v. Dudum) paint a damning picture of Hims & Hers' governance. The class actions allege violations of the Securities Exchange Act of 1934, focusing on false statements about the legality of compounded semaglutide and the durability of the Novo Nordisk partnership. The derivative lawsuit, meanwhile, targets the board for breaching its duty of care by approving the partnership without adequate due diligence.

These lawsuits are not merely legal technicalities—they reflect systemic governance flaws. For instance, the board's failure to address internal warnings about compounding risks suggests a culture of overconfidence and poor risk management. Such lapses are particularly damaging in healthcare, where regulatory compliance is non-negotiable.

Stock Valuation: A Tale of Two Metrics

The impact on HIMS' valuation is stark. reveals a freefall from $64.22 to $41.98 in just three days, a loss of $22.24 per share. This collapse was not a one-time event but part of a broader trend. Over the 12 months preceding the lawsuits, HIMS' market cap had already contracted by 40%, reflecting growing investor skepticism about its business model.

The stock's performance underscores a key principle: governance failures directly affect valuation. When companies obscure risks or mislead investors, they create a credibility gap that is costly to repair. For HIMS, the damage is compounded by its reliance on a narrow product portfolio and regulatory scrutiny.

Investment Implications: Lessons for the Future

For investors, the HIMS saga offers three critical takeaways:

1. Due Diligence on Governance: Scrutinize board composition, internal controls, and regulatory compliance. Companies in highly regulated sectors like healthcare must demonstrate rigorous adherence to rules.
2. Diversification and Risk Mitigation: Avoid overexposure to firms with opaque business models or aggressive growth strategies that may mask underlying vulnerabilities.
3. Legal and Regulatory Vigilance: Monitor class-action filings and regulatory updates. These often serve as early warning signals for governance issues.

While HIMS' future remains uncertain, the lawsuits could force meaningful reforms. A successful derivative action might lead to board restructuring or operational overhauls. However, given the magnitude of the stock's decline and the company's tarnished reputation, recovery is far from guaranteed.

Conclusion: A Cautionary Tale

Hims & Hers Health's struggles are a cautionary tale for investors and corporate leaders alike. Governance failures, when compounded by regulatory missteps, can unravel years of value creation in a matter of days. For investors, the lesson is clear: prioritize transparency, accountability, and regulatory compliance in your portfolio choices. In an era where trust is a currency as valuable as capital, companies that neglect governance do so at their peril.