Clover Says SEC Started a Probe in Wake of Hindenburg Report

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Feb 05 2021, 8:52 PMFeb 05 2021, 10:21 PMFebruary 05 2021, 8:52 PMFebruary 05 2021, 10:21 PM

(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 and Hindenburg didn’t immediately respond to requests 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.”

Shares of Franklin, Tennessee-based Clover, which slumped 12% after the report on Thursday, dropped 4.5% to $11.68 at 10:17 a.m. in New York.

The Hindenburg report 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.”