Headquartered in Franklin, TN, Clover Health Investments, Corp (CLOV) is a provider of Medicare Advantage plans via its Clover assist platform. Through its platform, Americans eligible for Medicare coverage can purchase private PPO (preferred provider organization) or HMO (health maintenance organization) that provide Medicare benefits.

Much like similar companies such as Lemonade (LMND), Clover is an "insurtech" company. That is, it's trying to "disrupt" the traditional insurance industry (in its case, health insurance), by using technology to provide better coverage at a lower cost1. However, Clover Health Investments may be better known to investors by its status as a Meme Stock.

Going public via a SPAC merger in early 20212, Clover was not one of the original stocks that spiked in price during the initial meme stock wave of January-February 2021. But in June 2021, after months of becoming heavily shorted due to a "short report" issued by Hindenburg Research3, a short squeeze occurred with CLOV stock4. This short report made numerous allegations about the company's business practices, and accused the company of failing to disclose it was under active investigation by the U.S. Department of Justice

Between Jun 1, 2021 and Jun 9, 2021, the stock went from $7.65 per share, to as much as $28.85 per share, due to a large influx of trading by retail speculators. After peaking on Jun 9, CLOV stock saw considerable declines in both its price, and in its short interest. As of this writing, Clover trades for $5.40 per share, and short-interest stands at around 11% of float5. In contrast, short-interest was around 36.8% of float during the June 2021 short squeeze.

Recent Developments

No longer seen as a short-squeeze opportunity, focus with Clover Health has shifted to its underlying business. The company continues to work to expand its share of the Medicare Advantage 

The allegations made by Hindenburg Research in its February 2021 report did result in shares declining in price prior to its June 2021 short-squeeze. But the concerns raised by the report have become secondary in the months since the squeeze.

Instead, profitability issues have been a larger concern among investors. Continued high net losses have outweighed positives, such as Clover Health's high rate of revenue growth, as well as an upgrade of its PPO plan by the Centers for Medicare and Medicaid Services (CMS)6.

In order to replenish its cash position, Clover raised $300 million through a secondary equity offering in November 20217.

Financial Highlights

Income Statement

In the trailing twelve months (TTM) ending Sep 30, 2021, Clover has reported revenues of $1.16 billion8. This is a sharp increase from the $623.6 million in revenue generated in the twelve-month period ending Sep 30, 2020.

However, this big increase in revenue has not translated into improved profitability/narrower losses. Over the past twelve months (ending Sep 30, 2021), Clover has reported negative operating income and net losses of $517.8 million and $526.95 million, respectively. For the twelve-month period ending Sep 30, 2020, operating losses and net losses came in at $80.6 million and $88.7 million, respectively.

The company high medical cost ratio (MCR) is cited as the reason behind its big increase in losses9. Clover has argued that this is a short-term phenomenon, a product of increased use of medical plans following last year's Covid-19 lockdowns (see more under "Recent Results" below).

Balance Sheet

As of Sep 30, 2021, Clover Health had a total of $952.5 million in assets, of which $202.3 million was cash10. With the November 2021 secondary offering, these amounts will likely increase when the company next reports numbers. Liabilities totaled $540.2 million.

Recent Results

For the quarter ending Sep 30, 2021, Clover Health reported $427.2 million in revenue, up 153% year-over-year11. Losses, due primarily to a high MCR, remained high. For the quarter, the company reported negative non-GAAP EBITDA of $102.3 million, and net losses of $34.5 million. Its MCR has come down, but remains above 100%. 

Like it has stated previously, Clover has cited increased plan utilization as the reason behind its high MCR figure. In the release that accompanies results, it gives a figure it calls "Normalized Medicare Advance MCR (non-GAAP)," in an attempt to demonstrate what its MCR numbers will be after the post-Covid spike in usage subsides. For the quarter, Clover said its normalized MCR was 94.8%, down from 96.3% in the preceding quarter.

  1. ^ https://medium.com/clover-off-the-charts/founders-letter-who-we-are-and-why-we-exist-6d732266113e
  2. ^ https://www.bizjournals.com/sanjose/news/2021/01/08/clover-health-ready-to-start-trading-on-nasdaq.html
  3. ^ https://hindenburgresearch.com/clover/
  4. ^ https://www.bloomberg.com/news/articles/2021-06-08/palihapitiya-s-clover-roars-to-record-as-short-sellers-circle
  5. ^ https://fintel.io/ss/us/clov
  6. ^ https://www.globenewswire.com/news-release/2021/10/08/2311303/0/en/CMS-Upgrades-Clover-Health-s-PPO-Plan-to-3-5-Stars.html
  7. ^ https://seekingalpha.com/news/3773987-clov-stock-despite-successful-announces-completion-of-300m-public-offering-of-common-stock
  8. ^ https://fintel.io/sm/us/clov
  9. ^ https://seekingalpha.com/news/3767434-clover-heath-q3-revenues-top-estimates-ma-medical-cost-ratio-near-breakeven
  10. ^ https://fintel.io/bs/us/clov?d=1000&t=q
  11. ^ https://investors.cloverhealth.com/static-files/82bf0101-b9c0-42e3-8d1a-25c3aa6fb7b4
Created by Thomas Niel on 2021/11/28 15:12

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