Chamath Palihapitiya
Olivia Michael | CNBC
Clover Health Investments, backed by Chamath Palihapitiya, said on Friday that it had received an investigation notification from the Securities and Exchange Commission and that it intended to cooperate.
However, Clover withdrew against a critical report by sales specialist Hindenburg Research, saying some of the allegations in the report were “completely untrue”.
On Thursday, Hindenburg released a harsh report, calling Clover Health a “bad deal,” sending the insurance company’s shares down more than 12 percent, the largest daily percentage drop in four months. Clover shares rose more than 3% in premarket transactions on Friday, after the company published its answer.
Hindenburg also said that Clover was investigated by the Justice Department and that the investigation was not disclosed to investors. In his response to Hindenburg’s report on Friday, Clover said he had received inquiries from the DOJ, but did not believe the inquiries were important to his investors. The company has characterized DOJ surveys as standard practice because Clover works with the Medicare system.
Clover said he had decided not to disclose the DOJ’s inquiries after consulting his lawyers. The company did not say what the DOJ investigations were about. As for the SEC, Clover said he received the letter from the agency on Thursday, following the publication of the Hindenburg report. The company said it was unaware of investigations other than the letter from the SEC it received on Thursday.
On Thursday, the DOJ declined to comment on any investigations or potential investigations into Clover.
In addition to the alleged investigations, Clover responded to Hindenburg’s criticism of a separate company that shares investors and governance with Clover called Seek Insurance. Hindenburg claimed that Seek Insurance, a site designed to help people find Medicare plans, did not disclose its relationship with Clover, even though its website is characterized as an unbiased platform for choosing a health plan. Clover said in its response that Seek Insurance is an affiliate of Clover, but is still an independent start-up.
Clover also said that the Seek website will be updated soon with more information and published a breakdown of the plans that Seek customers choose. According to Clover, 13.5% of Seek customers chose a Clover plan, behind CVS / Aetna (17%), Humana (20%) and Cigna (20%).
– Reuters contributed to this report.
This story is developing.