Outcome Health - start-up sued by Goldman Sachs  & other investors for fraud

Outcome Health - start-up sued by Goldman Sachs & other investors for fraud

Posted by Vivek Nama on November 11th 2017

Investors are suing Outcome Health, a start-up selling ad space on screens in doctors’ offices, for alleged fraud and breach of contract eight months after investing $500 million into the company.

Outcome Health is a health startup founded by Rishi U. Shah, who is a successful media and technology entrepreneur & investor, who founded Outcome Health, along with Shradha Agarwal in 2006. Outcome Health is currently valued at $5.5 billion after it raised nearly $500 million from high-profile investors round in May.
 
In a report first published in The Wall Street Journal, investors Goldman Sachs, which invested $100 million into the company, Alphabet’s investment arm CapitalG, Norwest Venture Partners and Laurene Powell Jobs’ Emerson Collective Investments, which each invested $50 million, are seeking to freeze $225 million in those investments.
As per the lawsuit, which alleges that Outcome Health misled investors by “knowingly providing false data and financial reports before the firms invested $487.5 million beginning in March,” according to the WSJ report.
 
These same investors now want their money back, claiming in the lawsuit Outcome Health “now hold securities that may be worthless.” Vivek Kundra, Outcome’s COO, also resigned last week amid these same accusations, though Outcome said that he left on personal grounds. 
 
The investors allege in a lawsuit filed in the New York State Supreme Court in New York County that the company, including Shah and Agarwal, knowingly provided false data and financial reports to convince the firms to participate in the $487.5 million round. Investors also became alarmed at the allegations and, according to the Journal, pressed Outcome’s CEO Rishi Shah to provide backup of his claims, only to discover “manipulations consistent with those reported by The Wall Street Journal,” according to the suit.
 
Outcome Health reportedly currently owes $300 million to creditors who would require the start-up to pay them back before anyone else. But the company says that the Goldman Sachs led equity investors misusing the court system to advance their own short-term, self-interest of winning an advantage over debt-holders .
 
It has hired the law firm of former U.S. attorney Dan Webb to look into the allegations. (Inputs from The Wall Street Journal and Tech Crunch)

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