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UPDATE 4-Clover Health shares dip as SEC looks into short-seller allegations

· 02/05/2021 06:41
UPDATE 4-Clover Health shares dip as SEC looks into short-seller allegations

Adds Hindenburg comments, updates share move

By Anirban Sen and Stephen Culp

- U.S. regulators are following up on a critical report about Clover Health Investments Corp CLOV.O by short-selling specialist Hindenburg Research and have told the insurance company to preserve any relevant documents.

Clover, backed by venture capitalist Chamath Palihapitiya, said on Friday it would cooperate with the request from the U.S. Securities and Exchange Commission (SEC).

The company's share price was last down 4.6%.

Clover said the SEC had requested "document and data preservation for the period from January 1, 2020, to the present, relating to certain matters that are referenced in the (Hindenburg) article."

The company also disclosed a separate earlier inquiry from the U.S. Department of Justice (DOJ), but added it had not received any civil investigative demands or subpoenas from the department.

Palihapitiya and the company were fully aware of the DOJ inquiry, which it did not consider as "material information" for its earlier disclosures, Clover said.

On Thursday, Hindenburg published a scathing report, the title of which called Clover a "broken business," and accused the company of not disclosing a DOJ investigation into its business model and its software offering, Clover Assistant.

The insurance firm's shares fell more than 12%, their biggest daily percentage drop in four months, following the report. nL4N2KA3NP

Clover said on Friday some of the claims were "completely untrue" and executives Vivek Garipalli and Andrew Toy said in a separate blog post that the report was "rife with ad-hominem attacks, sweeping inaccuracies and gross mischaracterizations."

Hindenburg followed up with a statement on Friday rejecting the idea that the DOJ investigation is non-material, since Clover derives nearly all its revenue from the government. It also reiterated that it does not have a short position in Clover stock or options and will not receive monetary compensation for this work. nFWN2KB1SN

Hindenburg was the first major short-selling research house to publish a new report since the eruption two weeks ago of the battle between short-sellers and investors over GameStop Corp GME.N and a number of other stocks.

Clover, which sells Medicare-backed insurance plans, went public through a $3.7 billion deal with a special purpose acquisition company (SPAC) backed by Palihapitiya. Its other investors include Alphabet Inc GOOGL.O and Silicon Valley-based venture capital giant Sequoia Capital.


(Reporting by Stephen Culp in New York. Anirban Sen and Sagarika Jaisinghani in Bengaluru. Editing by Mark Potter and Nick Zieminski)

((Anirban.Sen@thomsonreuters.com; (within U.S.+1 646 223 8780; outside U.S. +91 80 6182 3583) Twitter: @asenjourno;))