Amwell is in talks to acquire struggling teletherapy company Talkspace for about $200 million, according to Israeli business publication Calcalist.

Talkspace's stock price surged in the wake of the deal rumors. It went public in 2021 after a merger with a special purpose acquisition company, opening at $8.90 per share. The deal valued Talkspace at $1.4 billion.

But the digital mental health company's fortunes have slowed since its debut on the public markets. Earlier this month, Talkspace received a letter warning that it could be delisted from Nasdaq, since its stock had closed below the minimum $1.00 per share for 30 consecutive business days.

It reported an $18 million net loss in the third quarter, compared with a $2 million loss in the prior-year period, as the teletherapy company continued to shift its focus toward business-to-business sales from a consumer-facing model. 

Talkspace also recently announced it had appointed a new CEO, Dr. Jon R. Cohen, who has served on the company's board since September. Talkspace's cofounders Oren and Roni Frank stepped down from their roles about a year ago. Its COO left shortly after, following an internal review of his conduct “in connection with a company offsite."

This isn't the first potential deal for Talkspace this year. Seeking Alpha reported this summer that Talkspace had declined an earlier buyout deal from Amwell, and Axios Pro wrote that outpatient provider Mindpath Health had also approached the teletherapy company.

Both companies declined to comment on the Amwell acquisition rumors. 

THE LARGER TREND

While a number of health tech and digital health startups hit the public markets last year, often using SPACs, the market slowed to a halt in 2022 amid a contracting economic environment.

According to a report by Rock Health, merger and acquisition activity dropped in the second quarter this year, but picked up a bit in Q3, even as larger digital health funding dropped off. The report noted M&A may look more appealing compared with unfriendly private and public markets.