Short sellers vs the Clover Health (CLOV) share price: here’s my view

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first_img See all posts by Zaven Boyrazian Zaven Boyrazian | Tuesday, 15th June, 2021 | More on: CLOV I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. Instead, I’d much rather invest in this business: Enter Your Email Address The Clover Health Investments (NASDAQ:CLOV) share price has seen some explosive growth recently. In fact, just over the first week of June, the US stock jumped by nearly 200%, from $7.64 to $22.15. It has since come down to around $15 today. But that is still around 50% higher than a year ago. What’s causing this sudden upward surge? And should I be considering Clover Health as a new addition to my portfolio?The surging Clover Health (CLOV) share priceBefore breaking down what’s going on with the CLOV share price, let’s take a look at the actual business. Clover Health is a Medicare Advantage health insurance company. The revenue model is pretty simple. Customers pay a monthly premium and should they ever need to visit the hospital, the bill is largely taken care of.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…An insurance company wouldn’t be my first guess for a business capable of almost tripling in the space of a week, so what happened? It seems the Reddit army is at it again. Unless you’ve been living under a rock, you’ve probably heard of the meme stock movement that sent the share prices of companies like GameStop and AMC Entertainment through the roof, despite poor underlying fundamentals. These retail investors now have their sights locked on Clover Health, making the recent surge in the CLOV share price a result of yet another short squeeze.Investigating what happenedBack in February this year, famous short-selling firm Hindenburg Research published a report against Clover Health with some pretty serious accusations. It proclaimed that Clover Health failed to disclose a Justice Department investigation when going public via a SPAC. It also accused Chamath Palihapitiya, a backer of the SPAC, of misleading investors when promoting the business.Following this report, the Securities and Exchange Commission started an investigation. And since then, the volume of shares being sold short has climbed to around 36% today. With such a high short interest, retail investors adamantly started buying shares pushing the CLOV share price up to trigger a short squeeze.But is this a case of a bad business being inflated by an internet frenzy? Maybe not. The management team has vehemently denied the accusations. CEO Vivek Garipalli described the report as “rife with ad hominem attacks, sweeping inaccuracies and gross mis-characterisations”. And so, giving the company the benefit of the doubt, is the underlying business worthy of its newly elevated valuation?The underlying businessUnlike other meme stocks, Clover Health does actually look healthy. It has a nearly insignificant amount of debt ($46m) on the balance sheet with plenty of cash ($405m) to spare. What’s more, the company has been successfully growing its customer base over the years, rising from 16,000 members in 2016 to over 66,000 as of the end of March this year. Combining this with a rapidly expanding revenue line makes the company appear to be somewhat undervalued, assuming growth can be maintained.Having said that, I’m personally not interested in adding this business to my portfolio. Like many Medicare insurance providers, the bulk of the revenue actually comes from the US government, as most customers pay their premiums directly to Medicare.  Suppose the allegations by Hindenburg Research prove to have merit? In that case, it could embroil the business in expensive legal proceedings that would likely compromise the CLOV share price. Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. Short sellers vs the Clover Health (CLOV) share price: here’s my view Image source: Getty Images Simply click below to discover how you can take advantage of this. “This Stock Could Be Like Buying Amazon in 1997” Zaven Boyrazian does not own shares in Clover Health Investments. The Motley Fool UK owns shares of Clover Health Investments. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. Our 6 ‘Best Buys Now’ Shareslast_img

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