Clover Health Investments (CLOV) responded on Friday to an attack by Hindenburg Research alleging that the technology-focused healthcare company withheld important information from investors, including an active investigation by the Department of Justice. In his response, Clover called Hindenburg’s claims a “desperate publicity attempt” that ignores the truth.
Hindenburg, which usually sells short that bets on falling company shares, said in its report on Thursday that it had no position in Clover, which sells Medicare insurance mainly in low-income areas. Instead, Hindenburg claimed it was issuing the report because it wants the public to know the role of short sellers in “exposing corporate fraud and malfeasance”.
But Clover suggested that Hindenburg is just trying to rescue its reputation in a climate where short sellers are viewed unfavorably. “Given the latest market views on short sellers, we believe that Hindenburg, which strives to draw the attention of its altruism by saying that it is not selling CLOV shares, is sincerely trying to redeem itself, postulating itself as a knight financial markets, ”Clover said in his response, which he said he was unaware of the Hindenburg report before it was made public on Thursday.
According to Hindenburg, a civil investigative demand letter from the Justice Department shows that it is investigating 12 issues related to Clover, including its “Clover Assistant” software, as well as undisclosed kickbacks, marketing practices and third-party agreements. The investigation, Hindenburg concluded, poses a potential existential risk for a company that gets almost all of its Medicare revenue.
The Hindenburg report also targeted the special-purpose acquisition company (SPAC) led by Chamath Palihapitiya who went public with the technology-focused healthcare company in January.
In his response, Clover acknowledged the Department of Justice’s investigation, although he said the firm’s lawyers, as well as outside and third party lawyers, including the IPO underwriter’s lawyer, considered that it was not material and therefore Clover determined that it was not. it was necessary to reveal it to investors. The matter “received a great deal of attention and focus,” said Clover, during his recent IPO and de-SPAC due diligence processes, and noted that he had received neither civil investigation requests nor subpoenas.
Clover also responded to Hindenburg’s allegations that its relationship with its subsidiary Seek Insurance was “underreported”, noting that it does not mention the subsidiary on its website, but tells the elderly it will provide unbiased information on how to find Medicare plans. In his response, Clover described Seek Medicare as a separate startup from Clover, with its own investor, board of directors, management team and employees.
In response to Hindenburg’s criticism of a reported fee of $ 200 per patient visit that Clover pays to doctors 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 general payment that covers the visit to the primary care physician’s office (PCPs) and the use of the Clover Assistant. This translates into almost double the traditional Medicare fees paid to PCPs for a visit to the office, more in line with fees paid to specialists. ”
Clover said that after the publication of Hindenburg on Thursday, he received an inquiry from the SEC, which the healthcare company said it believed was 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 records.
The short seller is known for issuing a hard-hitting report in September, calling the electric truck startup Nikola (NKLA) a fraud, causing the company’s stock to plummet.
Although Clover’s shares fell after Thursday’s report, they rose nearly 3% after the market opened on Friday.
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Alexis Keenan is a legal reporter at Yahoo Finance and a former litigation attorney. Follow Alexis Keenan on Twitter @alexiskweed.
Ines serves the United States stock market. Follow her on Twitter at @ines_ferre
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