Clover Health Investments (CLOV) responded on Friday to an attack by Hindenburg Research alleging that the technology-oriented healthcare business was hiding important information from investors, including an active investigation by the Department of Justice. In his response, Clover called Hindenburg’s allegations a “desperate attempt at publicity” that disregarded the truth.
Hindenburg, which is usually a short seller betting the shares of companies will fall, said in its report on Thursday that it has no position in Clover, which sells Medicare insurance in mostly low-income areas. Hindenburg rather claimed that he issued the report because he wanted the public to know what the role of short sellers is in ‘exposing fraud and malice’.
But Clover suggested that Hindenburg was merely trying to redeem its reputation in a climate where short sellers were considered unfavorable. “Given the market’s latest view of short sellers, we believe that Hindenburg, who is making an effort to proclaim their altruism by saying that they do not have a shortage of CLOV shares, is foolishly trying to redeem himself through him. as a white knight of the financial markets. , ”Clover said in his reply that he had no knowledge of the Hindenburg report before it was released on Thursday.
According to Hindenburg, a civil investigation letter from the Department of Justice shows that he is investigating twelve issues concerning Clover, including the software ‘Clover Assistant’, as well as setbacks, marketing practices and unknown transactions of third parties. The investigation, according to Hindenburg, poses a potential existence risk for a company that earns almost all of its revenue from Medicare.
The Hindenburg report was also aimed at the Special Purpose Procurement Enterprise (SPAC) led by Chamath Palihapitiya, which announced the technology-oriented healthcare venture in January.
In his reply, Clover acknowledged the Justice Department’s investigation, but said the company’s attorneys as well as outside and third party attorneys, including the IPO endorsement’s attorney, found that it was not material and therefore Clover considers it unnecessary to disclose to investors. The topic “has received widespread focus and attention,” Clover said during its recent IPO and de-SPAC due diligence process, noting that it has not received civil investigations and subpoenas.
Clover also responded to Hindenburg’s allegations that his relationship with his subsidiary Seek Insurance was ‘thinly publicized’ and pointed out that he did not mention the subsidiary on his website, but that he would give seniors their unbiased information about the find of Medicare plans. In its response, Clover described Seek Medicare as a separate business with Clover, with its own investor, board of directors, management team and employees.
In response to Hindenburg’s criticism of a reported $ 200 per patient visit that Clover pays to physicians using its Clover Assistant software, Clover said: ‘To be clear, the’ extra $ 200 per visit ‘is not incremental or ‘just to use the’ Clover Assistant, but represents the total payment that covers both the primary care office visit (PCPs) and the use of the Clover Assistant. This equates to about twice the traditional Medicare fees paid to PCPs for an office visit, more in line with the fees paid to specialists. ”
Clover said after the publication of Hindenburg on Thursday, he received an inquiry from the SEC, which according to the healthcare company is based on the Hindenburg report.
Hindenburg says his report is based on ‘more than a dozen interviews with former employees, competitors and industry experts’, along with government reports and insurance documents.
The short seller is known for issuing a serious report in September calling the launch of electric trucks, Nikola (NKLA), a scam, which led to the company’s inventory falling.
While Clover shares tumbled after Thursday’s report, it rose nearly 3% after the market opened on Friday.
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Alexis Keenan is a legal reporter for Yahoo Finance and former legal counsel. Follow Alexis Keenan on Twitter @alexiskweed.
Ines covers the US stock market. Follow her on Twitter @ines_ferre
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