Just five days after covering Clover Health (NYSE: CLOV), I, along with many others, was shocked to see the Chamath Palihapitiya-backed firm become the target of an infamous Hindenburg Research (HR) report. The short-seller firm unveiled an in-depth, four-month investigation into Clover Health, entitling the report:
‘Clover Health: How the “King of SPACs” Lured Retail Investors Into a Broken Business Facing an Active, Undisclosed DOJ Investigation’
What does this mean?
It is important to note that HR is not the SEC or DOJ, and its report has not been verified, but it still doesn’t look good.
Allegations against the healthcare technology company — which only IPO’d via a SPAC four weeks ago today — ranging from kickbacks to marketing practices to undisclosed third-party deals. Most notably, Clover’s sales figures are allegedly misleading, with accusations that its Medicare-reliant revenue stream is under threat and that 68% of total sales come via an outside brokerage firm controlled by Clover’s Head of Sales, Hiram Bermudez.
Though it is not believed that Palihapitiya was aware of the ongoing DOJ investigation prior to merging with Clover, he is accused of not taking proper due diligence before taking the company public, considering he owned a 27% stake as of January 7.
It is not a good look for Palihapitiya — who is already under the spotlight for his public support of last week’s GameStop short-squeeze — or his numerous other SPAC enterprises, which have indirectly come into question. Luckily, there appears to be no link between $CLOV and his other ventures.
If the allegations against Clover Health do hold true, then you can expect things to get ugly. If you’re a $CLOV investor, be sure to read the report yourself here.
A MyWallSt subscription gives you access to over 100 market-beating stock picks and the research to back them up. Our analyst team post daily insights, subscriber-only podcasts and the headlines that move the market. Get your free access now!
MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.
Content Manager at MyWallSt
Jamie is the Content Editor here at MyWallSt. His favorite stock is Apple, which is also the first stock he ever bought. Jamie is not only a big fan of its products, but he believes that the tech giant has a whole lot more to give the world, and hasn't even scraped the surface of its potential.