Chamath Palihapitiya
Olivia Michael | CNBC
Clover Health Investments, backed by Chamath Palihapitiya, said on Friday that it had received a notice from the Securities and Exchange Commission and that it intended to cooperate.
However, Clover backed down against a critical report from Hindenburg Research, a short-selling specialist, saying that some of the allegations in the report were ‘completely untrue’.
On Thursday, Hindenburg published a serious report, titled Clover Health a ‘broken business’, which caused the insurance firm’s shares to fall by more than 12%, the biggest daily drop in four months. Shares of Clover rose more than 3% in pre-trading on Friday after the company published its response. Hindenburg, who publishes the history of research on short sales, said on Thursday that he does not hold a position in Clover.
Hindenburg also said that Clover is being investigated by the Department of Justice and that the investigation has not been made public to investors. In its response to the Hindenburg report on Friday, Clover said it had received inquiries from the DOJ, but did not believe the inquiries were material to its investors. The company has characterized the DOJ queries as standard practice, as Clover works with the Medicare system.
Clover said he decided it was not necessary to disclose the DOJ investigations after consulting with his lawyers. The company did not say what the DOJ’s inquiries were about. On the SEC side, Clover said he received the letter from the agency on Thursday after the publication of Hindenburg’s report. The company said it was not aware of investigations outside the letter from the SEC that received it Thursday.
The DOJ declined to comment Thursday on any possible investigations or inquiries regarding Clover.
In addition to the alleged investigations, Clover responded to Hindenburg’s criticism of a separate company that shares investors and management with Clover, called Seek Insurance. According to Hindenburg, Seek Insurance, a website designed to help people find Medicare plans, does not disclose its relationship with Clover, although the website characterizes it as an unbiased platform for choosing a health plan. Clover said in its response that Seek Insurance is a subsidiary of Clover, but is still an independent business.
Clover also said that Seek’s website will be updated soon with more information, and will outline the plans that Seek’s customers are choosing. According to Clover, 13.5% of Seek customers chose a Clover plan, behind CVS / Aetna (17%), Humana (20%) and Cigna (20%).
–Reuters contributed to this report.
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