Per week after Chamath Palihapitiya, the Silicon Valley investor and SPAC kingpin, referred to as brief sellers “un-American” on CNBC, one among them has taken on a SPAC referred to as Clover Well being — which Palihapitiya took public final yr.
Fellow brief sellers are quietly cheering.
Activist short-seller Hindenburg Research, which turned well-known final yr for its work uncovering an alleged fraud at electrical truck maker Nikola, claimed that Clover Well being, a Medicare benefit plan, is underneath investigation by the Division of Justice. It confirmed a screenshot of the civil investigative demand to Clover that lists 12 particular areas of that investigation.
The inventory fell 12.5 % on the report, although Hindenburg stated it had not taken a brief place and was publishing to point out the worth of brief sellers — and their analysis — out there.
Hindenburg turned the primary of the activists to place out brief analysis following the assault final week by the Reddit discussion board WallStreetBets on the brief sellers of GameStop that led one among them, Melvin Capital, to lose about $6 billion and get a $2.75 billion bailout from Citadel and Point72 Capital.
[II Deep Dive: Buried in Reddit, the Seeds of Melvin Capital’s Crisis]
Many brief sellers have stated they went to money in the course of the fracas and have been reluctant to publish new concepts. Some have been additionally irritated by Palihapitiya’s position within the GameStop saga — because the inventory jumped after he stated he purchased calls — and by his comment that brief promoting appears un-American on CNBC.
Muddy Waters’ Carson Block retorted by calling Palihapitiya “SPAC Jesus” on Twitter and in a Bloomberg TV interview.
“He’s continually making statements that place him as a person of the folks when he’s actually simply attempting to railroad them into his SPACs,” defined Block in a Twitter message to Institutional Investor. He stated he had not learn the Hindenburg report.
“We expect Chamath has executed a masterful job advertising and marketing himself, capitalizing on the current chaos with GameStop and WallStreetBets to align himself with ‘on a regular basis’ traders – however his public persona strikes us because the sugar that helps the poison go down,” the Hindenburg report stated, calling Palihapitiya a “Wall Road superstar promoter.”
Palihapitiya, who has taken six SPACs public to nice acclaim, didn’t reply to an e mail request for remark. In an e mail, a Clover Well being spokesman stated, “We will likely be issuing an announcement to deal with the claims offered by Hindenburg,” however had not supplied the assertion by the point of publication.
Brief sellers have been skeptical of the SPAC increase and final yr revealed analysis criticizing six of them. Hindenburg stated its analysis predated the GameStop brouhaha.
“The identify first crossed our radar in October 2020, when Chamath started a media tour explaining his reasoning for taking the corporate public by way of SPAC,” the Hindenburg report stated. “Since then, whereas Chamath has seemingly taken each alternative obtainable to current himself as a beacon of rigorous due diligence and Wall Road know-how, our four-month investigation led us to conclude that Clover Well being’s tradition is rooted in deception and has taken each alternative to push or break the foundations to mislead its clients, traders, and Medicare.”
Hindenburg added that “regardless of almost 4 months of due diligence we carried out and financed for this report, we now have no place in Clover.”
“Why?” requested Hindenburg, which was based by Nathan Anderson, who is comparatively new to brief promoting however has been a due diligence skilled and whistleblower for years. “As a result of whereas brief promoting is all the time excessive threat, these are unprecedented occasions; many individuals are offended and proper now we consider it is very important exhibit the position brief sellers play in a wholesome, functioning market.”
Hindenburg added that it had taken the revenue motive of brief promoting “off the desk” on this case, “so the investing public can extra clearly see the work for what it’s; deep-dive investigative analysis.”
“Crucial, adversarial analysis is required as a result of Wall Road is a finely tuned machine, constructed to promote securities to the general public, no matter high quality. In brief, the company world is rife with fraud, and traders have little safety,” the report stated.
In a collection of tweets detailing the analysis, Hindenburg wrote that on a CNBC interview “Chamath proclaimed, unprompted that Clover “create[s] transparency…[doesn’t] encourage docs to upcode or do all types of issues in an effort to receives a commission.”
However Hindenburg stated “a former worker instructed us the DOJ is particularly asking about upcoding,” or overbilling Medicare. It famous the SPAC kingpin obtained greater than 20 million founders shares in alternate for $25,000 — which is widespread for SPAC founders.
Palihapitiya’s supporters didn’t wait, leaping on Hindenburg’s Twitter submit of the report. Anderson’s supporters did, too.
“Haters gonna hate. Nate’s gonna Nate,” Block opined on Twitter Thursday morning.
