The prospect of digital health startups hitting the public markets before they’re fully prepared creates the possibility for failure, according to a Rock Health report.
SPACs tend to prefer high growth sectors, and there aren’t many areas with as much recent expansion as in digital health, Mobi Health News reports.
Throughout the pandemic, digital health has been heralded as an alternative to traditional in-person care. Investors appear to agree, since they poured nearly $14 billion into digital health startups during 2020.
Secondly, the report points to a digital health IPO drought between 2017 and 2018 as a possible reason for the surge in SPAC activity. It predicts that the pent-up pressure from those two years could be a factor in explaining why so many companies are going public now.
Finally, the report notes that ever-changing market trends could also be feeding into the SPAC frenzy.
