Why has trade on the Clover Health share price been so volatile?

[MongiIG]

The Clover Health share price is down 50% year to date as the company finds itself under a SEC investigation and loses SPAC appeal.

Source: Bloomberg

 

Special-purpose acquisition company Health care Company Investment Chamath Palihapitiya United States

 

 Shaun Murison | Senior Market Analyst, Johannesburg | Publication date: Thursday 22 July 2021 

Who is Clover Health Investments Corporation?

Clover Health Investments Corp, is a healthcare technology company providing medicare advantage (MA) insurance plans to seniors. The groups offering includes hospital coverage, doctor visits, drug coverage, vision, dental, and hearing coverage.

The group also offers a software platform called the Clover Assistant, provide American seniors with highly affordable, 'obvious' healthcare plans. The company’s flagship software provides physicians with data-driven, personalised insights at the point of care.

Is Clover Health a SPAC?

Clover’s listed debut was through a merger with special purpose acquisition company (SPAC) Social Capital Hedosophia Holdings Corp III late in 2020

Why has the Clover Health share price under pressure?

A share price surge in the middle of the year (2021) appears to have dovetailed with moves in so called ‘meme’ and ‘SPAC’ stocks. The unprecedented gains can largely be attributed to speculative investments from retail traders coordinated on forums such as Reddit (WallStreetBets). These short term gains were however quickly unwound.

The Clover Health share price is down more than 50% year to date (as of 21 July 2021). The company boasts exciting propositions to help better a widely criticised US healthcare system, although the group remains unprofitable at present.

While the company originally forecast ambitious membership numbers in 2021, these numbers have been revised lower as the year has progressed. Clover Health is now also under investigation by the US Securities and Exchange Commission (SEC) on allegations that the company and its promoter, Chamath Palihapitiya, misled investors while promoting the business.

Clover Health share price – technical analysis

 

Source: IG charts

 

The share price of Clover Health has been in a sharp downtrend since June this year. The aggressive decline now sees its historical low at 6.20 as the next support target from the move. The Stochastic labouring in oversold territory is suggestive that short-term traders should not look to bet on a rebound just yet from current levels. Traders hoping for a rebound might prefer to see the price at least starting to trade above the dotted trend line on our chart, accompanied by a sharp move out of oversold territory.

Summary

• Clover Health is a healthcare technology company providing MA insurance plans to seniors
• The group also offers a software platform called the Clover Assistant, provide American seniors with highly affordable, ‘obvious’ healthcare plans
• Clover’s listed debut was through a merger with SPAC Social Capital Hedosophia Holdings Corp III late in 2020
• The unprecedented gains mid-year can largely be attributed to speculative investments from retail traders coordinated on forums such as Reddit (WallStreetBets)
• The share price is down more than 50% year to date (as of 21 July 2021)
• Clover is under investigation by the SEC on allegations that the company and its promoter, Chamath Palihapitiya, misled investors
• The share price has been in a sharp downtrend since June 2021