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Clover Health Hammered Despite New Chamath Stake

Clover Health Investments Corp. has seen its share price slammed this week despite news of a new stake from Chamath Palihapitiya.

The stock is reeling from 3Q earnings where the quality of earnings “remains challenging,” according to analysts at Cowen.

Chamath was in the news this week after selling part of his stake in Sofi. The sale was “to build up some cash reserves and fund several new investments,” according to Palihapitiya. He added in a letter posted on Twitter that he expects to increase his stake in Clover Health.

One of the company’s core problems has been an underwhelming insurance offering. The Securities and Exchange Commission (SEC) asked Clover in late-2020: “Please specifically explain your repeated use of the term, ‘obvious’ as used to describe your Medicare Advantage plans, when you first use the term in the Summary, on page 1.”

That was in reference to marketing information that hyped up products which were no better than its rivals.

However, Clover recently announced in October that the Centers for Medicare and Medicaid Services (CMS) had upgraded its rating of Clover’s Preferred Provider Organization (PPO) plan to 3.5 stars. Improvements like this could improve demand for its products.

CLOV Price Analysis

Clover Health has seen its stock move to new lows this week at $5.61 ahead of Friday’s session. The SPAC opened for trading at the IPO with a price of $10.07. A sharp speculative spike saw the stock above $28.00 in June but it has slumped ever since, trapping investors at those higher prices. The key support in CLOV is around the $6.00-6.50 level and that has just been broken to the downside so I would not expect a rally anytime soon.

CLOV Price Chart (Weekly)