A brief vendor vs. Chamath Palihapitiya

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

On Thursday, Hindenburg Analysis, the short-selling agency identified for flagging points with electrical automobile firm Nikola final 12 months, 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 through merger with Palihapitiya’s Social Capital Hedosophia III in October. “This is among the most easy 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 quick vendor of “sweeping inaccuracies and gross mischaracterizations.” Whereas the DoJ had submitted inquiries to the corporate, Clover Well being downplayed the difficulty, characterizing it as a daily incidence within the trade that it didn’t contemplate materials to its traders.

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

Right here’s the large shock about Hindenburg’s report: Whereas quick sellers usually launch such papers alongside a guess in opposition to the corporate, Hindenburg has no place within the firm. Lengthy or quick. As a substitute, the report appears to deal with the current flare-up in criticism in opposition to quick sellers, although 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 position quick sellers play in exposing fraud and company malfeasance.”

As traders flooded into GameStop shares final week, quick 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

Credit score: fortune.com

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