Clover Health

Version 1.2 by Thomas Niel on 2021/11/28 19:53

Overview

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.