Launched in San Francisco in 2015, Clover Health claims to use a ‘data-drive approach’ to make Medicare more affordable for seniors on low incomes. Medicare is a scheme by the US government first launched in the 1960s to expand health insurance coverage to all over 65. The company takes detailed information from traditional health insurance providers and aims to reduce medical costs by offering a premium (Medical Advantage) that covers doctor visits and drug costs.
Despite its laudable aim, the firm is dogged by controversy and accusations of serious wrongdoing. Co-founder and CEO Vivek Garipalli previously owned a string of hospitals in New Jersey, which were criticized for charging excessive fees for emergency room visits. Garipalli was later accused of siphoning off over $150 million from these hospitals by transferring profits into management companies, which unlike hospitals have no obligation to reinvest profits. These charges were made in a 2019 State Commission investigation. Another serious allegation is that Clover Health bribes doctors to use its services, a claim denied by Garipalli.
Clover Health was formerly known as Social Capital Hedosophia Holdings Corp III. Led by venture capitalist Chamath Palihapitiya, the company was taken public by a Special Purpose Acquisition Company (SPAC) in 2021. A SPAC differs from a normal IPO in that a holding company is launched with the sole purpose of taking over another business, in this case Clover Health. The new shares lost half of their value in a few months, before becoming the target of speculation of social media and spiking dramatically in June 2021. Clover Health remains unprofitable.
Some analysts have been harshly critical of the opacity of the SPAC IPO and Clover Health more generally, particularly when it was revealed they had not disclosed a Department of Justice investigation into the firm’s practices. As of 2021, Clover Health has a market capitalization of $2.41 billion. CEO Vivek Garipalli is the largest shareholder with around 20% of shares, and the stock is popular among retail investors. Institutional investors (excluding venture capitalists) hold just 10% of total shares.
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Clover Health does not pay a dividend to investors. Companies in the technology space often prefer to redirect profits back into the company for growth and expansion.
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