The Great SPAC Experiment: How Digital Health Bet Big and Lost Bigger
In 2020, I agreed to be an advisor to a special purpose acquisition company (SPAC), a company whose sole purpose was to go public, raise money, and acquire an actual company. This SPAC was specifically targeting the digital health space, and I thought I could help connect them with potential targets. In return, I could learn more about this hot area of innovation financing and get a piece of the upside.
By 2021, things didn't feel right to me, and I resigned as an advisor. They went public soon after, raising $150 million in the public market. However, they never found a target, the market lost interest in SPACs, and by late 2022, the entity dissolved and returned the remaining funds to shareholders.
While this particular SPAC didn't work out, there were 23 that did go on to acquire digital health companies. I wanted to know what happened to them, so I put together this analysis.
If you don’t have time to read the full thing, here’s the TL;DR:
Overall, SPACs failed in healthcare, just like they did in every other industry.
Nearly a third of digital health SPACs have ended in bankruptcy so far, a rate 4x higher than traditional IPOs.
Over a quarter of digital health SPACs have been acquired, but most at a major loss to shareholders.
The rest (43%) are still active, albeit with much lower valuations.
Only one of the digital health SPACs (Hims & Hers) is currently trading above its opening valuation.
SPACs have returned to being a targeted tool rather than the default path to public markets.
What are SPACs?
SPACs are shell corporations constructed for the sole purpose to raise money via an IPO and then find and acquire an existing private company with an actual product and revenue.
Once shareholders approve the merger proposal with the target company, the SPAC and the target company become one. The ticker symbol changes to the target company name, which now has access to any raised capital. The target company just became a public company much faster than it could on its own.
Why would a company want to be part of a SPAC vs. list directly in an IPO?
Faster access to capital (3-6 months vs. 12-18 months for a traditional IPO)
Lower fees
Ability to use pro forma calculations and forward-looking projections
Less stringent reporting requirements
The SPAC boom of 2020
The SPAC era, beginning in 2020, saw a surge of company IPOs via SPACs. In 2014, just 5% of IPOs were SPACs. By 2020 that number jumped to 55%. And by 2022, it peaked at 73%.
In digital health, this boom was a result of a healthcare ecosystem ripe for innovation and change, as the pandemic forced healthcare to digitize faster than ever before. The timing of SPACs emerged as a fast-tracked way to funnel capital into fast-growth companies in the space. SPACs offered a more streamlined, efficient pathway for companies to become public.
We witnessed a snowball effect as initially successful SPAC transactions created a bandwagon that others eagerly jumped on. Financial media coverage amplified SPAC successes, creating a perception of "missing out" on a financial innovation, while well-known investors like Richard Branson and Chamath Palihapitiya popularized the SPAC approach for others. This bandwagon effect created a self-perpetuating cycle where increased SPAC activity attracted more participants, driving valuations higher and temporarily masking potential drawbacks of the model, until the marketplace became increasingly crowded with SPACs hunting for merger targets.
The subsequent SPAC bust
Unfortunately, a lot of these companies have failed on the public market. While some failure is expected, digital health companies that went public via SPAC in 2020-2022 were over 4 times (!!!) more likely to go bankrupt than those that had a traditional IPO. Even those that were “acquired” were likely to be acquired for pennies on the dollar to shareholders.
And while 23% of IPOs during that time are currently valued above their opening valuation, only one SPAC is: Hims & Hers. The remaining healthcare SPACs are all valued below their opening valuation.
Data as of April 2nd 2025
Nearly a third of digital health SPACs have ended in bankruptcy
Thirty percent of digital health SPACs have ended up in bankruptcy as of April 2025. These include:
D2C genetic testing company 23andMe, which went public via SPAC in 2021 at a valuation of $6 billion.
Value-based primary care startup Cano Health, which went public at a valuation of $4.4 billion.
Telehealth startup Babylon, which went public at a valuation of $4.2 billion.
Digital therapeutics company, Pear Therapeutics, which went public in a SPAC deal worth $1.6 billion.
Addiction treatment business UpHealth, which became a public company through a $1.35 billion SPAC merger.
Pregnancy care company Nuvo Cares, became a public company in 2023 and went bankrupt just a year later.
Digital diabetes treatment developer Better Therapeutics, which went public in a SPAC deal worth $187 million.
Over a quarter of digital health SPACs have been acquired, but most at a major loss to shareholders
A quarter of digital health SPACs have avoided bankruptcy by getting scooped up by an acquirer, but for valuations far below their initial SPAC valuation. In fact, only one (Augmedix) was acquired at a valuation above its initial SPAC valuation.
Clinical diagnostics company SomaLogic was acquired by Standard BioTools Inc. (NasdaqGS:LAB) in an all-stock deal valued at ~$570 million.
Health content site ShareCare was acquired by investment firm Altaris for $518M, down from its $3.9 billion valuation.
Investment firm Patient Square Capital acquired SOC Telemed for $304.2 million, less than half of its $720 million SPAC valuation.
Decentralized clinical trial company Science37 was acquired by eMed for $38 million, a fraction of its previous $1 billion+ valuation.
Virtual Therapeutics acquired digital therapeutics startup Akili for $34 million, a significant loss from the $1 billion SPAC valuation.
Medical documentation services provider Augmedix was acquired for $139 million by Commure, an increase from its $40 million SPAC valuation.
The rest are still active, albeit with lower valuations
Of the digital health SPACs that remain publicly traded, 90% are trading below their valuation at the time of their SPAC merger. To compare, two-thirds of the digital health companies that had traditional IPOs have seen a drop in valuation.
Hims & Hers stands as the lone SPAC success story today, with its valuation up 343% since going public. Its direct-to-consumer telehealth model, focusing on stigmatized conditions like sexual health and hair loss, has resonated with consumers and investors alike.
The remaining companies tell a very different story:
Teletherapy startup Talkspace’s valuation is down 71%.
Medicare Advantage company Clover Health declined 73%.
Genetic testing platform GeneDx (formerly Sema4) has performed the "best" among the underperformers, down just -11.73%.
Baby monitor maker Owlet has lost 93% of its value.
Claritev (formerly MultiPlan) has declined 97% in value.
Fitness brand Beachbody Company holds the unfortunate distinction of the worst performer, trading down -98.09%
The average loss across all still-public digital health SPACs is a staggering 75% in value. This performance is significantly worse than both the broader market and digital health companies that went public through traditional IPOs during the same period.
Why did SPACs underperform?
The same regulatory flexibility that made SPACs attractive led to their downfall. SPACs operated with looser disclosure requirements and could present more aggressive forward-looking projections than companies going through traditional IPOs. While this initially accelerated deals and boosted valuations, it also created opportunities for abuse. Many digital health companies made overly optimistic projections about growth, market penetration, and time to profitability that they ultimately couldn't deliver on. When these companies failed to meet the lofty forecasts that had justified their valuations, public market investors responded by punishing their stock prices.
Rising interest rates and global inflationary pressures also contributed to a shift in investments and market volatility, leading to more cautious approaches for investing across the board. Investors began favoring direct IPOs and other conventional forms of equity financing over SPACs across all sectors, given the heightened economic uncertainty.
This downfall was universal across industries. Of 431 SPACs tracked by JP Morgan Asset Management, 90% had negative net returns. This was significantly worse than traditional IPOs; in fact, SPACs going public in the bullish 2020 stock market averaged a median loss to investors of more than 80% across all sectors. An examination of US-listed SPACs that included healthcare as their industry target found that a portfolio of healthcare SPACs underperformed the Russell 2000 Healthcare Index by 2.14% and the S&P 500 Healthcare Index by 6.72%.
There are many examples in which deals have failed to live up to expectations. One of the more obvious, glaring examples is that of telehealth startup Babylon Health. Once touted as a unicorn start-up, the company went public via a $4.2 billion SPAC merger. Following the public listing, the company continued to report net losses; in 2022 alone, the company reported a net loss of $221 million. Company performance continued to worsen throughout 2023, with a proposed deal to return to a private company through an acquisition deal with MindMaze. However, once the deal fell apart, Babylon was effectively sold for parts upon bankruptcy.
What did we learn?
The SPAC boom and bust in digital health offers a few key lessons for us. First and foremost, the public markets are unforgiving. Unlike private markets, where valuations are set periodically and companies can operate for extended periods without constant scrutiny, the stock of a public company is priced, bought, and sold every day. Public investors demand demonstrable results—companies that fail to achieve consistent profitability, sustainable growth trajectories, and predictable performance patterns won’t make it on Wall Street.
The bandwagon effect that drove many companies to choose the SPAC route resulted in rushed deals, inflated valuations, and ultimately poor performance. Most digital health companies accessed the public markets before achieving appropriate scale or profitability, leaving them vulnerable when market conditions changed and growth-at-all-costs fell out of favor.
The biggest lesson may be that patience and traditional pathways still have their merits. The digitization of healthcare remains a massive opportunity, but as these SPACs demonstrate, even promising innovation requires solid business fundamentals and appropriate timing when facing public market scrutiny.
Want an updated list with even more data points? Download the List of Digital Health Companies spreadsheet. This includes a list of private and public digital health companies, along with exits.