Clover Health Investments (CLOV) and the particular objective acquisition firm (SPAC) led by Chamath Palihapitiya that took the tech-focused healthcare firm public in January got here beneath assault on Thursday based mostly on claims by Hindenburg Research.
The report claims that Clover unfairly lured retail buyers into buying shares whereas failing to reveal that it was beneath energetic investigation by the Division of Justice.
Shares of Clover had been down over 10% in early buying and selling following the report.
Whereas Hindenburg is called a brief vendor, it says that it has taken no place in Clover, lengthy or brief. “Why? As a result of whereas brief promoting is all the time excessive danger, these are unprecedented instances; many individuals are offended and proper now we imagine it is very important exhibit the position brief sellers play in a wholesome, functioning market,” stated Hindenburg.
Clover, which sells Medicare insurance coverage, has a mission of serving “low-income and infrequently ignored communities.” In keeping with Hindenburg, a civil investigative demand letter exhibits that the Division of Justice is investigating 12 points associated to Clover, together with its software program “Clover Assistant,” in addition to kickbacks, advertising and marketing practices, and undisclosed third-party offers.
“This Civil Investigative Demand and the corresponding investigation current a possible existential danger for a corporation that derives nearly all of its income from Medicare, a authorities payor,” Hindenburg stated in its report, which got here after 4 months of investigating Clover.
Hindenburg goes on to explain a relationship between Clover and its subsidiary Search Insurance coverage as “thinly disclosed,” noting that it doesn’t point out the subsidiary on its web site but tells seniors that it’s going to present them with unbiased info on discovering Medicare plans.
“Search makes no point out of its relationship with Clover on its web site but misleadingly advertises to seniors that it provides ‘unbiased’ and ‘unbiased’ recommendation on deciding on Medicare plans,” Hindenburg writes. “It claims, ‘We don’t work for insurance coverage firms. We give you the results you want’, regardless of actually being owned by Clover, an insurance coverage firm. Its actions are additionally beneath investigation by the DOJ.”
Hindenburg says its report relies on “greater than a dozen interviews with former workers, rivals, and trade consultants,” together with authorities reviews and insurance coverage filings.
Investor and enterprise capitalist Chamath Palihapitiya helped take Clover public on January 8 by Social Capital Hedosophia Holdings Corp III, a particular objective acquisition firm (SPAC).
Yahoo Finance contacted the Division of Justice to inquire about Hindenburg’s claims, in addition to Clover Well being and Chamath Palihapitiya’s agency Social Capital to request a response to Hindenburg’s claims, and didn’t obtain responses earlier than publication of this story.
GameStop saga is about ‘working class v. hedge funds’: Reddit WSB person
Alexis Keenan is a authorized reporter for Yahoo Finance and former litigation legal professional. Comply with Alexis Keenan on Twitter @alexiskweed.
Ines covers the U.S. inventory market. Comply with her on Twitter at @ines_ferre