Every week after Chamath Palihapitiya, the Silicon Valley investor and SPAC kingpin, known as brief sellers “un-American” on CNBC, one among them has taken on a SPAC known as Clover Well being — which Palihapitiya took public final yr.
Fellow brief sellers are quietly cheering.
Activist short-seller Hindenburg Research, which grew to become well-known final yr for its work uncovering an alleged fraud at electrical truck maker Nikola, claimed that Clover Well being, a Medicare benefit plan, is underneath investigation by the Division of Justice. It confirmed a screenshot of the civil investigative demand to Clover that lists 12 particular areas of that investigation.
The inventory fell 12.5 % on the report, although Hindenburg mentioned it had not taken a brief place and was publishing to point out the worth of brief sellers — and their analysis — out there.
Hindenburg grew to become the primary of the activists to place out brief analysis following the assault final week by the Reddit discussion board WallStreetBets on the brief sellers of GameStop that led one among them, Melvin Capital, to lose about $6 billion and get a $2.75 billion bailout from Citadel and Point72 Capital.
[II Deep Dive: Buried in Reddit, the Seeds of Melvin Capital’s Crisis]
Many brief sellers have mentioned they went to money throughout the fracas and had been reluctant to publish new concepts. Some had been additionally irritated by Palihapitiya’s position within the GameStop saga — because the inventory jumped after he mentioned he purchased calls — and by his comment that brief promoting appears un-American on CNBC.
Muddy Waters’ Carson Block retorted by calling Palihapitiya “SPAC Jesus” on Twitter and in a Bloomberg TV interview.
“He’s continually making statements that place him as a person of the individuals when he’s actually simply attempting to railroad them into his SPACs,” defined Block in a Twitter message to Institutional Investor. He mentioned he had not learn the Hindenburg report.
“We predict Chamath has carried out a masterful job advertising himself, capitalizing on the latest chaos with GameStop and WallStreetBets to align himself with ‘on a regular basis’ buyers – however his public persona strikes us because the sugar that helps the poison go down,” the Hindenburg report mentioned, calling Palihapitiya a “Wall Road movie star promoter.”
Palihapitiya, who has taken six SPACs public to nice acclaim, didn’t reply to an e mail request for remark. In an e mail, a Clover Well being spokesman mentioned, “We can be issuing a press release to deal with the claims offered by Hindenburg,” however had not supplied the assertion by the point of publication.
Brief sellers have been skeptical of the SPAC growth and final yr printed analysis criticizing six of them. Hindenburg mentioned its analysis predated the GameStop brouhaha.
“The identify first crossed our radar in October 2020, when Chamath started a media tour explaining his reasoning for taking the corporate public through SPAC,” the Hindenburg report mentioned. “Since then, whereas Chamath has seemingly taken each alternative obtainable to current himself as a beacon of rigorous due diligence and Wall Road know-how, our four-month investigation led us to conclude that Clover Well being’s tradition is rooted in deception and has taken each alternative to push or break the principles to mislead its prospects, buyers, and Medicare.”
Hindenburg added that “regardless of practically 4 months of due diligence we carried out and financed for this report, we’ve no place in Clover.”
“Why?” requested Hindenburg, which was based by Nathan Anderson, who is comparatively new to brief promoting however has been a due diligence knowledgeable and whistleblower for years. “As a result of whereas brief promoting is all the time excessive danger, these are unprecedented instances; many individuals are indignant and proper now we imagine you will need to display the position brief sellers play in a wholesome, functioning market.”
Hindenburg added that it had taken the revenue motive of brief promoting “off the desk” on this case, “so the investing public can extra clearly see the work for what it’s; deep-dive investigative analysis.”
“Essential, adversarial analysis is required as a result of Wall Road is a finely tuned machine, constructed to promote securities to the general public, no matter high quality. Briefly, the company world is rife with fraud, and buyers have little safety,” the report mentioned.
In a collection of tweets detailing the analysis, Hindenburg wrote that on a CNBC interview “Chamath proclaimed, unprompted that Clover “create[s] transparency…[doesn’t] inspire docs to upcode or do all types of issues with a purpose to receives a commission.”
However Hindenburg mentioned “a former worker informed us the DOJ is particularly asking about upcoding,” or overbilling Medicare. It famous the SPAC kingpin acquired greater than 20 million founders shares in alternate for $25,000 — which is frequent for SPAC founders.
Palihapitiya’s supporters didn’t wait, leaping on Hindenburg’s Twitter publish of the report. Anderson’s supporters did, too.
“Haters gonna hate. Nate’s gonna Nate,” Block opined on Twitter Thursday morning.