Disclaimer: All information provided herein by Cedar Grove Capital Management (“CGC”) is for informational purposes only and does not constitute investment advice or an offer or solicitation to buy or sell an interest in a private fund or any other security. An offer or solicitation of an investment in a private fund will only be made to accredited investors pursuant to a private placement memorandum and associated documents. Cedar Grove Capital Management, LLC (fund operating Cedar Grove Research) may hold positions mentioned in the report and may change its views about or its investment positions in any of the securities mentioned in this document at any time, for any reason or no reason. The author was previously an employee of Roman Health Ventures (“Ro”), a direct competitor of Hims & Hers Health (HIMS). While he has not been an employee of theirs since the beginning of 2022, he’s still very knowledgeable about the inner workings of this industry and still holds shares as a previous employee. While he may drop in publicly available information about Ro for this particular research, he is not speaking for or on behalf of Ro, nor does he have any inside information about anything since he left that position. At the time of publication, Cedar Grove Capital Management does not hold any position in Hims & Hers Health (HIMS). Cedar Grove Capital may change its views about or its investment positions in any of the securities mentioned in this document at any time, for any reason or no reason. At the time of writing this report, CGC does not have any position in HIMS.
John Gotti, once the head of the Gambino crime family in New York, was tried for years via three high-profile trials in the 80s to put the very public mafia boss behind bars; however, nothing seemed to stick.
His acquittal in these trials earned him the nickname, the “Teflon Don,” playing into the non-stick polymer coating of cooking pans that prevents sticking. It was only years after that, in 1992, that John Gotti was officially sentenced to life in prison after being found guilty on 14 counts of conspiracy to commit murder and racketeering.
But the point of why we bring up this short reminder of history is not because we think Andrew Dudum is some West Coast mafia boss, or because he’s committing any crimes. It’s to draw comparisons to how, even though HIMS continues to very publicly enact questionable business decisions in the name of playing David (from David and Goliath), any other publicly traded company’s stock would have already been hammered and stayed down pending official clarity on the situation and/or swift action from enforcement agencies.
However, aside from its epic collapse in February, when we rightfully sent subscribers on the ground research at the end of January why there wasn’t a shortage anymore, nothing has seemed to stick.
Not when Hunterbrook Media published in summer 2024 that HIMS had lax online intake forms that prescribed GLP-1s without even seeing a doctor.
Not when the shortage was over → lost ~25% in a day.
Not when the FDA won lawsuits brought on by compounders for “wrongfully” ending the shortage prematurely.
Not when the WSJ published an investigative piece in March, highlighting that people were being prescribed medication for hair loss without consulting a doctor or being informed of all the side effects. An example given was obtaining a prescription in under 60 seconds after completing their visit.
Not after we highlighted in May that they were purposely still prescribing their compounded meds over Novo Nordisk’s (NVO) FDA-approved drugs under the guise of personalization.
Not after NVO pulled their partnership with the company for questionable marketing concerns about safety → lost >30% in a day.
Not after >80 bipartisan lawmakers called upon the FDA to do something about these bad actors abusing the system.
Not after investors were reminded of an ongoing FTC probe into the company’s cancellation practices, or lack thereof.
Not after the FDA literally sent the company a cease and desist regarding their marketing ads that they deemed were false and misleading.
Not after their Q2’25 earnings showed continued deceleration in the core business, and that they would have had to lower guidance if it weren’t for the ZAVA acquisition.
The list can go on and on, but our point is, this list of events against a company would normally bring it down to size; however, nothing has stuck!
This year alone, HIMS has experienced at least three drawdowns (local peak to trough) of more than 35%. And yet, the company continues to chug along as if nothing happened.
Despite this, short interest in the stock continues to increase to all-time highs.
Speaking logically, when short interest is this high, it’s really because the downside risk is massive, and traders/investors are largely betting something to come to fruition to break the stock or capture volatility.
So, either all the short interest is wrong in their bet, or it’s just a waiting game, which can mean being equally wrong if not handled appropriately. Something short sellers have seen multiple times this year.
Many short sellers, including ourselves, believed the catalyst would have come from the FDA stepping up and doing its job by regulating this industry (compounding) and its very public and rampant abuse.
Eight months after the FDA took weight loss drugs off the market, six months after 503a compounding pharmacies were supposed to stop mass prescribing, and five months after 503b compounding pharmacies were supposed to do the same, nothing has been done.
Because of this, many investors have asked us when we think the FDA will do something, if at all. Frankly, we have no idea anymore, mainly because it should have technically happened already. In a not-so-secret agenda, it’s very apparent that the HHS and FDA under Trump have prioritized discovering the cause of autism and put everything else on the back burner, despite this rampant abuse.
This has allowed bad actors to continue roaming free and openly continue compounding in the face of a regulatory agency whose job it is supposed to be to stop these guys.
Regarding HIMS, though, Madison Muller over at Bloomberg put it very bluntly,
“It will be years before Novo’s patents expire in the US, but perhaps Dudum is banking on regulatory nonenforcement.”
This is why we think the FDA hasn’t come down on them yet. Their priorities are not there at the moment, and Trump’s obsession with reducing prescription drug costs seems to be playing into why the FDA is sitting on its hands. Hell, even the bipartisan congressional letter didn’t do much.
This lack of enforcement and rising stock price in the face of persistent bad news is why we think it’s applicable to label Andrew, for now, a “Teflon Don” of telehealth.
But we do think that might change soon, which could set in motion what short sellers have been waiting for. We see three possible scenarios that might finally bring this short-selling holy war to its epic close.
Just like with John Gotti, all you need is one thing to stick to bring it all down.
Let’s go into what we think those are, and what they could mean for HIMS Q3’25 earnings at the beginning of November.
1) Violating Laws Prohibiting the Corporate Practice of Medicine
*Note: Please be sure to see both our recordings linked below that share our experience with the HIMS weight loss flow after choosing specific answer choices.
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