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Home / Project Management Articles and News / A brief vendor vs. Chamath Palihapitiya

A brief vendor vs. Chamath Palihapitiya

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That is the online model of Term Sheet, a day by day publication on the largest offers and dealmakers. Signal as much as get it delivered free to your inbox. 

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

On Thursday, Hindenburg Analysis, the short-selling agency recognized for flagging points with electrical automobile firm Nikola final yr, launched a report focusing on Chamath Palihapitiya-backed Clover Health and referred to as it a “damaged enterprise.”

The insurance coverage startup agreed to go public by way of merger with Palihapitiya’s Social Capital Hedosophia III in October. “This is likely one of the most simple 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 to aged individuals 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 brief vendor of “sweeping inaccuracies and gross mischaracterizations.” Whereas the DoJ had submitted inquiries to the corporate, Clover Well being downplayed the problem, characterizing it as an everyday incidence within the business that it didn’t contemplate materials to its buyers.

However because the launch of Hindenburg’s report, Clover Well being has obtained 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 massive shock about Hindenburg’s report: Whereas brief sellers usually launch such papers alongside a wager in opposition to the corporate, Hindenburg has no place within the firm. Lengthy or brief. As a substitute, the report appears to deal with the latest flare-up in criticism in opposition to brief sellers, despite the fact that Hindenburg says it started trying into the enterprise some 4 months in the past: “We predict on this second for public markets, it’s extra necessary for individuals to grasp the function brief sellers play in exposing fraud and company malfeasance.”

As buyers flooded into GameStop shares final week, brief sellers have been heavily targeted by retail merchants. Palihapitiya in the meantime positioned himself on the facet of the retail merchants in a lot of the saga.

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Lucinda Shen
Twitter: @shenlucinda
E-mail: lucinda.shen@fortune.com





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