Reddit Trading Frenzy Makes 'SPAC King' Chamath Palihapitiya A Billionaire—Again


Top line

A strong resurgence in stocks in Medicare Advantage insurer Clover Health put "SPAC king" Chamath Palihapitiya back to a billionaire last week, according to Forbes estimates, as Reddit traders amid a broader movement pushing individual investors against institutional investors Giants plow into the heavily short stocks.

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Clover Health's shares, which are heavily shorted, rose Monday along with a number of so-called meme stocks.

Getty Images for Vanity Fair

Important facts

Clover Health shares rose 32% on Monday, along with a number of other so-called meme stocks, as a week-long trading frenzy sparked by bullish Reddit traders hit a boiling point again.

Palahapitiya, 44, ended the day valued at $ 1.3 billion and added $ 131 million to his net worth on Monday alone after re-entering the billionaire ranks last week, according to Forbes estimates based on public data.

Clover Health's short interest ushered in the Reddit fueled mania and has soared to a record high of 40 million shares, according to the latest data, representing nearly 10% of the outstanding shares - in line with levels of other meme stocks posted on Increase Monday, including BlackBerry, Koss Corp, and GameStop.

Analysts attributed Clover Health's volatility to a number of unusual option activity on Monday when Reddit traders on the r / WallStreetBets discussion forum garnered thousands of positive votes in posts announcing a potential short squeeze that typically occurs when institutional investors are making the bet on a price decline, reduce your losses by buying back shares at higher prices.

Clover Health's share surge also coincided with a surge in trading volume on Monday, as its shares traded a staggering 100 million times on Monday - the highest volume since a similar one-day jump in mid-April.

Meanwhile, experts have been pessimistic about the stock. Bank of America analyst Kevin Fischbeck recently warned in a press release that the company will fail to meet its "high membership growth targets," giving the stock a target price of $ 9-25% below Monday's closing price of $ 11 , $ 92.

Key background

Clover Health debuted on the Nasdaq in January after a $ 3.7 billion deal with Social Capital Hedosophia Holdings Corp. III, one of the six SPACs of Palihapitiya's investment firm Social Capital, went public. Clover Health stocks rose nearly 60% in the two months following the merger announcement, followed by falling 59% through May amid a hectic trial - pulling Palihapitiya out of the ranks of billionaires. In a regulatory filing in February, Clover Health announced that the Securities and Exchange Commission was investigating allegations by short seller Hindenburg Research, which published a report days earlier alleging that Clover Health was misleading investors about its business prior to going public have led. The short seller also announced that the Justice Department is investigating at least 12 issues related to kickbacks, marketing practices and undisclosed deals with third parties. Clover Health denies any wrongdoing.

tangent

Many meme stocks also soared on Monday. AMC jumped 15% and at one point shot up more than 20%. Meanwhile, BlackBerry and GameStop rose 14% and 13%, respectively.

Surprising fact

Like AMC, which announced a shareholder-centric reward program last week, Clover Health hugged its staunch Reddit investors and even answered questions from them during a conference call last month. "We strongly believe in the retail investor community," said CEO Vivek Garipalli at the time. "Personally, I started out as a retail investor over 20 years ago, probably trading too often. I made money, then lost money ... but really made me become a great investor. "

further reading

Billionaire Clover Health CEO Vivek Garipalli's Expletive-Ridden Tirade (Forbes)

Clover projects will only have half the Medicare membership it promised to investors before going public (Forbes)

Chamath Palihapitiya's Clover Health Announces New SEC Investigation Responding to Scathing Short-Seller Allegations (Forbes)

https://thedailytradingnews.com/reddit-trading-frenzy-makes-spac-king-chamath-palihapitiya-a-billionaire-again/

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