Wall Street Is Punishing AmWell And The Schoenberg Brothers. But Is The Company

The turn of the 20th century was a time of dramatic change, with two titans of innovation competing to transform the way Americans lived and worked. Thomas Edison didn’t invent the lightbulb, but his and Nikola Tesla’s efforts to create systems to safely and efficiently distribute electricity would create the building blocks for the modern economy and way of life.

Both men would live well into the 1900s, to see their efforts come to fruition. One would continue building his company to great success while growing his family; the other lived alone, withdrew from society, and fell in love with a pigeon.

A century later, two physician brothers have been working for the better part of two decades to enable a future of medicine that is more accessible and convenient for both consumer and clinician. As with Edison and the lightbulb, Roy and Ido Schoenberg didn’t invent telehealth, but their company AmWell is seeking to distribute it nationwide.

Yet after the pandemic drove telehealth volume to astronomical highs – during which the Schoenberg brothers astutely took AmWell public and raised more than $1.1 billion (in an IPO and secondary offering) – there has been a massive backslide.

Meanwhile, AmWell has now blown through almost $700 million in cash over three and a half years, spending $320 million on two acquisitions and ~$350 million on research and development to ‘replatform’ its technology stack.

And AmWell’s revenue over the past three years has been flat even as competitors’ revenues have grown. One of those competitors just ousted its CEO. Finger-pointing at AmWell has begun.

After trading as high as $42, AmWell is now a penny stock. The company has been notified by the New York Stock Exchange that it could be delisted.

And so, despite still sitting on more than $370 million in cash and with virtually zero debt, AmWell’s market capitalization (the collective value of all outstanding shares) sits at $156 million. That is, AmWell’s investors value the company less than the cash they could distribute to themselves if the company simply shut down today.

Why is the company’s market cap less than the cash it has on hand? The answer appears to come down to three things: Roy, Ido, and the control that the two have in corporate voting power. As a result, it looks like investors attribute negative ~$107 million in shareholder value to Roy and Ido. Apiece.

Roy and Ido both remain optimistic about telehealth’s future, and AmWell’s opportunities as well. Are they right about the future, and accordingly, how should investors value AmWell shares? Or is it too late, as investors seem to have concluded?

Or, reframed: are the Shoenberg brothers a modern day version of Edison, or like Tesla will they withdraw from society, abandon their company and wind up proclaiming their love for pigeons?

Level Setting: AmWell and Telehealth’s Story

Up until recently, care delivered remotely was the exception, not the rule. Challenges to adoption were both on the provider side (lack of reimbursement, training, integration, etc) and the consumer side (lack of awareness, technology barriers, etc), which stymied broader telehealth adoption for decades.

Into this void stepped Teladoc (in 2002) and AmWell (in 2006) to evangelize virtual care: the delivery of healthcare online and via video visits. Teladoc decided to sell its services to employers as a benefit to employees, while AmWell largely sold telehealth software to incumbent health systems and health plans, encouraging them to create their own virtual care offerings. (AmWell did establish its own medical group to support its clients, but unlike Teladoc, has not sold itself as a virtual care provider to either employers or consumers.)

The promise of telehealth and virtual care was (and is) compelling: the potential to increase access to care, at lower cost, with the potential to complement in-person care to improve quality.

Adoption and demand grew through the 2010s, but slowly. That all changed overnight with the pandemic, as consumers could not access care in person, nor could providers practice in person. Regulations that had been a barrier were waived, while plans figured out reimbursement policies. “We’ve advanced 10 years in 10 months,” was a common refrain.

Telehealth began to encompass not just audio and video visits, but other things as well. Remote patient monitoring. Asynchronous visits. Automated messaging.

Hindsight being 20/20, what is most clear about the impact of the pandemic on telehealth and virtual care is three things:

1. It prompted a temporary massive adoption and experimentation by both…