Hims & Hers' Legal Quagmire: Navigating Risks and Opportunities in the Wake of a Class Action Lawsuit

The sudden collapse of Hims & Hers Health, Inc. (NASDAQ: HIMS) into a securities fraud scandal has created a volatile landscape for investors. The company's stock plummeted over 34% on June 23, 2025, following Novo Nordisk's termination of a critical partnership, exposing systemic risks in its business model and triggering a class-action lawsuit. For investors, the question is no longer whether Hims & Hers faces existential threats but how to assess the stock's undervalued status, mitigate losses, and capitalize on potential recovery avenues.

The Core of the Crisis: Deceptive Practices and Lost Partnerships

At the heart of the allegations is Hims & Hers' collaboration with Novo Nordisk, announced on April 29, 2025. The partnership promised to distribute Novo's FDA-approved Wegovy®, a weight-management drug in high demand. However, Novo abruptly terminated the deal on June 23, accusing Hims of selling “illegitimate, knockoff versions of Wegovy®” sourced from unapproved Chinese manufacturers. The knockoff drugs, allegedly compounded in bulk without individualized prescriptions—a clear violation of FDA regulations—posed safety risks and eroded trust in Hims' operational integrity.

This breach not only shattered the partnership but also revealed a pattern of regulatory noncompliance. The FDA has long prohibited mass compounding of drugs like Wegovy® under the guise of “personalized prescriptions,” yet Hims reportedly flouted these rules to capitalize on the Wegovy® shortage. The fallout has left the company isolated: its stock now trades at $41.98 per share, a stark contrast to its April high of $63.

Valuation Under Siege: Penalties, Partnerships, and Pivots

The lawsuit, Sookdeo v. Hims & Hers Health, Inc., alleges the company misled investors by omitting material risks tied to its Novo partnership and compounding practices. For valuation, two factors loom largest:
1. Regulatory Penalties: If Hims faces fines akin to Novo's $100 million 2022 settlement for similar misconduct, its $750 million market cap could be obliterated.
2. Loss of Partnerships: The Novo split signals broader distrust in the pharmaceutical sector. Rebuilding relationships with regulated drug manufacturers may prove impossible unless Hims pivots to compliant operations.

Investor Recourse: Class Actions, Deadlines, and Derivative Strategies

The lawsuit offers investors avenues to recover losses, but timing is critical:
- Class Action Participation: The deadline to file as lead plaintiff is August 25, 2025. Investors holding shares between April 29 and June 23, 2025, are eligible. Firms like Robbins Geller (with a 98% success rate in securities cases) are handling claims, increasing recovery odds.
- Derivative Suits: Shareholders may sue Hims' board for fiduciary breaches, arguing executives prioritized short-term gains over compliance. Delaware's lenient standing requirements make this feasible.
- Opting Out: For those seeking higher settlements, opting out allows individual lawsuits—but comes with litigation risks.

The Opportunity: A Fire Sale for the Bold?

While risks are acute, the stock's 34% drop may present a speculative opportunity. Key considerations:
- Undervalued Assets: If penalties are manageable and Hims pivots to compliant telehealth services (e.g., mental health or dermatology), its $41.98 price could rebound.
- Liquidity Risks: The company's cash reserves and ability to secure new partnerships will determine survival. A pivot to generic, FDA-approved drugs or a merger with a compliant compounding firm could stabilize the business.

Final Analysis: Proceed with Caution

Hims & Hers' future hinges on two variables: the outcome of the class action and its ability to rebuild trust. Investors should:
1. Monitor Legal Milestones: Track the class action's progress and penalties from the FDA.
2. Avoid Long-Term Holdings: The stock's volatility and regulatory exposure make it a high-risk, short-term play.
3. Leverage Recourse: Join the class action if eligible, but avoid overcommitting capital to this name.

In a sector where patient safety and regulatory compliance are non-negotiable, Hims & Hers has painted itself into a corner. For now, the stock is a cautionary tale—its recovery depends on admitting fault, restructuring, and proving it can operate within legal boundaries. Until then, the risks far outweigh the rewards for all but the most daring speculators.