Clover Says SEC Started a Probe in Wake of Hindenburg Report

(Bloomberg) -- Clover Health Investments Corp. said the Securities and Exchange Commission has started a probe after a research report accused the health-insurance company of misleading investors when it went public.

“Clover received notice of an investigation from the SEC,” the company said in a regulatory filing Friday. “We believe this inquiry is based on the short-selling report issued yesterday morning.”

Short seller Hindenburg Research published a report Thursday claiming Clover failed to disclose a Justice Department probe. Hindenburg said it's not betting against Clover shares, and its motive was to show the value of “critical, adversarial research” after retail traders upended the market in recent weeks in a rebellion against Wall Street short sellers.

Hindenburg's report “is rife with ad-hominem attacks, sweeping inaccuracies and gross mischaracterizations,” Clover said in the filing. “It belies a desperate attempt for publicity while sacrificing any regard for the truth.”

Representatives for the SEC didn't immediately respond to a request for comment.

Clover said that while it was aware of the Justice probe, it determined it wasn't material and the company wasn't required to disclose it to investors. The company hasn't received any civil investigative demands or subpoenas from the department, but did get a request for information. It said it responded on a “voluntary basis.”

“Regular investors and senior citizens shouldn't be the last to know,” Hindenburg said in a tweet on Friday, referring to Clover's acknowledgment of the Justice Department probe. In a separate response published on its website, Hindenburg rejected Clover's argument that it didn't have to disclose the DOJ probe.

“The idea that a DOJ investigation is non-material when Clover derives nearly all its revenue from the government is farcical,” Hindenburg said.

Shares of Franklin, Tennessee-based Clover, which slumped 12% after the report on Thursday, dropped 3.6% to $11.79 at 2:24 p.m. in New York.

Hindenburg's research also called out billionaire Chamath Palihapitiya, a venture capitalist who backed the special purpose acquisition company Clover used to go public.

“We suspect this was done in order to sensationalize what is otherwise a rather underwhelming piece of research,” Clover said in the filing. Hindenburg is “seeking to redeem itself by posturing as a white knight of the financial markets.”

Hindenburg referred to the Palihapitiya issue in a separate tweet Friday, referring to the billionaire by his Twitter handle. “We are pleased to see that now, for the first time, regular investors know what Clover and @chamath knew the whole time: that the company has been under active DOJ investigation,” Hindenburg said.

©2021 Bloomberg L.P.