Home Business A brief vendor vs. Chamath Palihapitiya

A brief vendor vs. Chamath Palihapitiya

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It’s the particular goal acquisition craze assembly the GameStop madness.

On Thursday, Hindenburg Analysis, the short-selling agency identified for flagging points with electrical automotive firm Nikola final yr, launched a report focusing on Chamath Palihapitiya-backed Clover Health and known as it a “damaged enterprise.”

The insurance coverage startup agreed to go public by way of merger with Palihapitiya’s Social Capital Hedosophia III in October. “This is among the most simple investments I’ve ever made,” Palihapitiya said at the time of the announcement.

However on Thursday, Hindenburg Analysis’s report argued Clover Well being was not so straightforward: Amongst different points, the short-activist group accused the corporate of fueling gross sales utilizing deceptive advertising and marketing to aged folks and alleged that Clover didn’t disclose a Division of Justice investigation into the corporate’s gross sales practices.

Clover Well being hit again at Hindenburg in a lengthy post Friday, accusing the brief vendor of “sweeping inaccuracies and gross mischaracterizations.” Whereas the DoJ had submitted inquiries to the corporate, Clover Well being downplayed the problem, characterizing it as a daily prevalence within the trade that it didn’t take into account materials to its traders.

However because the launch of Hindenburg’s report, Clover Well being has obtained a discover of investigation from the Securities and Change Fee, the corporate revealed too. Shares of Clover Well being have been down 13% Friday.

Right here’s the massive shock about Hindenburg’s report: Whereas brief sellers sometimes launch such papers alongside a guess towards the corporate, Hindenburg has no place within the firm. Lengthy or brief. As an alternative, the report appears to deal with the current flare-up in criticism towards brief sellers, though Hindenburg says it started wanting into the enterprise some 4 months in the past: “We expect on this second for public markets, it’s extra vital for folks to know the function brief sellers play in exposing fraud and company malfeasance.”

As traders flooded into GameStop shares final week, brief sellers have been heavily targeted by retail merchants. Palihapitiya in the meantime positioned himself on the aspect of the retail merchants in a lot of the saga.

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Lucinda Shen
Twitter: @shenlucinda
E mail: lucinda.shen@fortune.com

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