Chamath Palihapitiya
Olivia Michael | CNBC
Clover Health Investments, backed by Chamath Palihapitiya, said on Friday it has received an investigation notice from the Securities and Exchange Commission and plans to cooperate.
However, Clover opposed a critical report by short-selling specialist Hindenburg Research, saying that some of the statements in the report were “completely untrue.”
On Thursday, Hindenburg released a damning report, the title of which Clover Health called a “broken company,” causing the insurance company’s stock to drop by more than 12%, their largest daily percentage drop in four months. Shares of Clover were up more than 3% in premarket trading on Friday after the company released its response. Hindenburg, who has a history of publishing short selling research, said on Thursday that it has no position in Clover.
Hindenburg also said Clover is being investigated by the Justice Department and the investigation has not been disclosed to investors. In his response to the Hindenburg report on Friday, Clover said it has received inquiries from the DOJ but believed the investigations were not material to its investors. The company characterized DOJ studies as standard practice, as Clover works with the Medicare system.
Clover said it decided it did not need to disclose the DOJ investigations after consulting with its attorneys. The company did not say what the DOJ’s questions were about. On the SEC side, Clover said it received the agency’s letter on Thursday following the release of Hindenburg’s report. The company said it was unaware of any investigation outside of the SEC’s letter it received on Thursday.
The DOJ declined to comment on any investigations or investigations involving Clover on Thursday.
In addition to the alleged investigations, Clover responded to Hindenburg’s criticism of a separate company that shares investors and governance with Clover called Seek Insurance. Hindenburg Alleged Seek Insurance, a site designed to help people find Medicare plans, does not disclose its relationship with Clover, although the website bills itself as an unbiased platform for choosing a health plan. Clover said in its response that Seek Insurance is a subsidiary of Clover, but is still an independent start-up.
Clover also said Seek’s website would soon be updated with more information, and published a rundown of the plans Seek customers are choosing. According to Clover, 13.5% of Seek customers opted for a Clover subscription, behind CVS / Aetna (17%), Humana (20%) and Cigna (20%).
– Reuters contributed to this report.
This story develops.