Clover Health Investments (CLOV) and the special-purpose procurement company (SPAC) led by Chamath Palihapitiya, which launched the technology-focused healthcare business in January, were attacked on Thursday on the basis of claims by Hindenburg Research.
The report alleges that Clover unfairly enticed retail investors to buy shares, while failing to disclose that it is being actively investigated by the Department of Justice.
According to the report, Clover shares fell 10%.
Hindenburg is known as a short seller, but says he has not taken any position in Clover, long or short. ‘Why? Because while short selling is always a high risk, these are unprecedented times; “Many people are angry and at the moment we believe it is important to show the role that short sellers play in a healthy, functioning market,” Hindenburg said.
Clover, which sells Medicare insurance, has a mission to ‘overlook low-income and often-affected communities’. According to Hindenburg, a civil investigation letter shows that the Department of Justice is investigating 12 issues related to Clover, including the Clover Assistant software, as well as setbacks, marketing practices and unknown third-party transactions.
“This demand for civil investigation and the corresponding investigation poses a potential subsistence risk for a company that earns almost all of its revenue from Medicare, a government payer,” Hindenburg said in a report following a four-month investigation into Clover came.
Hindenburg then describes a relationship between Clover and its subsidiary Seek Insurance as ‘thinly publicized’, noting that he does not mention the subsidiary on his website, but still tells seniors that he will give them unbiased information about finding Medicare -plans.
“Seek makes no mention of his relationship with Clover on his website, but misleadingly advertises to seniors that he is giving ‘independent’ and ‘unbiased’ advice on choosing Medicare plans,” Hindenburg writes. “It claims: ‘We work not for insurance companies. We work for you ‘, although we are literally owned by Clover, an insurance company. Its activities are also being investigated by the DOJ. “
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 investor and venture capitalist, Chamath Palihapitiya, helped launch Clover on January 8 through Social Capital Hedosophia Holdings Corp III, a special acquisition venture (SPAC).
Yahoo Finance contacted the Department of Justice to inquire about Hindenburg’s claims, as well as Clover Health and Chamath Palihapitiya’s Social Capital firm to request an answer to Hindenburg’s claims, and did not receive any responses until this story was published. not.
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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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