February 07, 2021 - An investor in shares of Clover Health Investments, Corp. (NASDAQ: CLOV) filed a lawsuit in the U.S. District Court for the Middle District of Tennessee over alleged violations of Federal Securities Laws by Clover Health Investments, Corp. (formerly Social Capital Hedosophia Holdings Corp. III) in connection with certain allegedly false and misleading statements.
On January 7, 2021, Clover Health Investments, Corp merged with SPAC Social Capital Hedosophia Holdings Corp. III and began to trade under the symbol CLOV on NASDAQ. On February 4, 2021, a report was published entitled Clover Health: How the ‘King of SPACs’ Lured Retail Investors Into a Broken Business Facing an Active, Undisclosed DOJ Investigation[.] The report alleged, among other things, that Clover has not disclosed that its business model and its software offering, called the Clover Assistant, are under active investigation by the Department of Justice (DOJ), which is investigating at least 12 issues ranging from kickbacks to marketing practices to undisclosed third-party deals.
According to the complaint the plaintiff alleges that the defendants between October 6, 2020 and February 4, 2021 and in the registration statement issued in connection with the December 2020 Merger of Clover and Social Capital III made false and/or misleading statements and/or failed to disclose that Clover’s Clover Assistant platform was under active investigation by the Department of Justice (“DOJ”) for at least 12 issues ranging from kickbacks to marketing practices to undisclosed third-party deals, that the DOJ’s investigation presented an existential risk to the Company, since it derives most of its revenues from Medicare, that Clover’s sales were driven by a major undisclosed related party deal and misleading marketing targeting the elderly, not its purported “best-in-class” technology, that a significant portion of Clover’s sales were by way of an undisclosed relationship between Clover and an outside brokerage firm controlled by Clover’s Head of Sales, and that as a result, defendants’ statements about its business, operations, and prospects, were materially false and misleading and/or lacked a reasonable basis at all relevant times.