Clover Health Investments Corp

On February 4, 2021, Hindenburg Research released a report entitled "Clover Health: How the ‘King of SPACs’ Lured Retail Investors Into a Broken Business Facing an Active, Undisclosed DOJ Investigation[.]" The report alleged, among other things, that "Clover has not disclosed that its business model and its software offering, called the Clover Assistant, are under active investigation by the Department of Justice (DOJ), which is investigating at least 12 issues ranging from kickbacks to marketing practices to undisclosed third-party deals." 

On this news, the Company’s stock price fell $1.72 per share, or 12.3%, to close at $12.23 per share on February 4, 2021, thereby injuring investors. 

On February 5, 2021, Clover issued a response in which it admitted, among other things, that it was aware of the DOJ investigation. The Company also disclosed that it had received a letter from the U.S. Securities and Exchange Commission (“SEC”), indicating that it is conducting an investigation and requesting document and data preservation from January 1, 2020 to the present. 

The complaint filed alleges that throughout the Class Period, Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, Defendants failed to disclose to investors that: (1) the Company’s Clover Assistant platform was under active investigation by the DOJ for at least 12 issues ranging from kickbacks to marketing practices to undisclosed third-party deals; (2) the DOJ’s investigation presented an existential risk to the Company, since it derives most of its revenues from Medicare; (3) Clover’s sales were driven by a major undisclosed related party deal and misleading marketing targeting the elderly, not its purported “best-in-class” technology; (4) a significant portion of Clover’s sales were by way of an undisclosed relationship between Clover and an outside brokerage firm controlled by Clover’s Head of Sales; and (5) as a result, Defendants' statements about its business, operations, and prospects, were materially false and misleading and/or lacked a reasonable basis at all relevant times.