Hindenburg Research goes after Clover Health, the insurance firm backed by Chamath Palihapitiya

Hindenburg, the firm that famously revealed the fraud behind electric vehicle maker, Nikola ($NKLA) in 2020, is back at it again.

This time, they’re targeting Clover, the insurtech company, backed by famous investor and SPAC evangelist, Chamath Palihapitiya.

Learn more: What is a SPAC?

The company that was supposed to disrupt US healthcare

Founded in 2012, Clover offers Medicare Advantage, drug coverage plans funded by the government, to seniors. Clover raised $890m from big investors including Google Ventures to disrupt healthcare. Alongside its Medicare plans, Clover built a software, Clover Assistant, that uses data and machine learning to help physicians deliver better care to patients.

Over the past few years, Clover struggled with growing losses and missing growth targets — losing $201m in 2018 and $363m in 2019. Despite these losses, Chamath saw potential in Clover and took the company public through his SPAC, $IPOC.

Chamath is well-known for popularizing SPACs — launching 6 different SPACS ($IPOA, $IPOB… $IPOF) to take 6 different companies public. He famously took Virgin Galactic ($SPCE) and Open Door ($OPEN) public — which is up 414% and 109% since the SPAC announcements.

But unlike Chamath’s other SPACs, Clover had fallen 20% since going public and Clover is currently under scrutiny from investors…

Disruption gone wrong

On Feb. 4, Hindenburg, a research firm known for uncovering fraudulent companies, released a report making bold claims against Clover…

• Using deceptive sales practices to sell Medicare plans to seniors — i.e. not disclosing fees and partner relationships.
• Hiding an investigation by the Department of Justice that Clover did not disclose before going public.

In a follow-up report, Hindenburg even accuses Chamath of knowing of the investigation while promoting Clover to public investors — Clover fell nearly 15% after the report. See Chamath’s counter reply.

In a separate report, Kevin O’Leary, a healthcare expert (not the shark on SharkTank), uncovers several flaws with Clover…

• Clover has a 3-star rating, provided by the Medicare Program, which puts them in the bottom 13% of all Medicare plans offered.
• Clover Assistant has no actual data supporting the benefits of the platform and has overstated its usage by physicians.

For investors… Don’t fanboy too hard

Investors have blindly put Chamath on a pedestal due to his prior successes. But don’t forget, even the best investors can be wrong — and so can Hindenburg, Hindenburg’s track record hasn’t been perfect either.

It’s also important to remember that sponsors behind SPACs (i.e. Chamath) are profiting from taking a company public regardless of whether the stock goes up or down.