Digital mental health provider Kooth (KOO:AIM) saw its shares slump after the company revealed (18 Oct) it had received a 30-day notice from the US state of Pennsylvania to terminate its pilot contract.

The contract was first signed on 11 October 2021 and was extended by a year from 30 June 2024 to June next year, whilst negotiations on a new contract were ongoing.

The company said the status of its work in the state going forward was now ‘unclear’ and it was urgently seeking clarification. Analysts at Stifel believe politics played a role and the decision was not related to the product, which received positive user feedback and utilisation.

The share-price reaction looks severe given it was worth just $3 million and paled into insignificance compared with the four-year $188 million contract signed with the state of California.

Unfortunately, on 24 October the shares fell a further 20% following publication of a newsletter article regarding Kooth’s service in California which contained ‘outdated’ information underestimating the product’s uptake and effectiveness.

Kooth has subsequently put the record straight and the shares seem to have stabilised. The company said its product has already demonstrated meaningful clinical benefits with 70% of those accessing single-session therapy reporting positive outcomes. 

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