UpHealth Puts Unit in Bankruptcy After Losing SPAC Fee Ruling

Jonathan Randles, Bloomberg News

LONDON, ENGLAND - DECEMBER 04: A stethoscope is pictured in a General Practitioners surgery on December 4, 2014 in London, England. Ahead of next years general election, the Chancellor of the Exchequer, George Osborne, has said he will put an extra £2bn into frontline health services across the UK, ahead of a plan drawn up by NHS bosses calling for an extra £8bn a year by 2020. In England, everyone would be able to see a GP seven days a week by 2020. (Photo by Carl Court/Getty Images) , Photographer: Carl Court/Getty Images Europe

(Bloomberg) -- A unit of UpHealth Inc. filed for bankruptcy after a judge recently ruled the telemedicine provider must pay investment bank Needham & Co. a $31.3 million fee for arranging its 2021 merger with a publicly traded blank-check company.

UpHealth Holdings Inc. filed for Chapter 11 on Tuesday, listing assets and liabilities each of between $100 million and $500 million, according to a Delaware bankruptcy petition.

The company completed a combination with GigCapital2 Inc. and Cloudbreak Health LLC in June 2021 and began trading on the New York Stock Exchange. The deal is the latest involving a former special purpose acquisition company, or SPAC, transaction to collapse into a bankruptcy.

Its shares have lost 84% of their value in the last year and closed Monday at 98 cents.

Chief Executive Officer Sam Meckey said in a statement Uphealth turned to bankruptcy to protect its stakeholders “and achieve a fair resolution of this matter through an appeals process of the Needham judgment.” The Chapter 11 filing is not expected to have an impact on UpHealth’s operations, Meckey said.

The bankruptcy comes little more than a week after New York Supreme Court Justice Margaret A. Chan ruled against UpHealth in a contract dispute with Needham, which was retained to raise capital for the telehealth startup. Filing bankruptcy immediately pauses the litigation.

Justice Chan ruled UpHealth owes Needham $31.3 million plus interest and other costs. UpHealth said at the time that Justice Chan’s ruling redefined the terms of its contract with Needham and that it would explore options for settling the dispute and appealing the decision.

UpHealth said in its petition that it owes Needham $40 million, and is disputing that amount.

The case is UpHealth Holdings Inc., case number 23-11476, US Bankruptcy Court District of Delaware (Wilmington).