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Defending Shorts, Hindenburg Takes on Palihapitiya’s Clover

  • Report alleges health insurer misled investors; shares slump
  • Research firm says it aims to show importance of short sellers
Chamath Palihapitiya
Chamath PalihapitiyaPhotographer: Michael Nagle/Bloomberg
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Billionaire Chamath Palihapitiya has been talking up the evils of short selling, offering no sympathy for hedge funds and defending the right of retail investors to sway the fate of stocks the way Wall Street pros do.

Now one of those pros is taking aim at a startup backed by the venture capitalist and taken public through one of his special purpose acquisition companies. Hindenburg Research, a short seller that gained fame last year with its critical analysis of Nikola Corp., has come out with a report targeting Palihapitiya’s Clover Health Investments Corp., claiming the health insurer misled investors and failed to disclose a Justice Department probe.

The company’s shares tumbled 12% Thursday. Clover is working on a response to the report that should come out Friday, a spokesman said. A spokesperson for Palihapitiya didn’t respond to requests for comment.

Hindenburg said it’s not betting against Clover shares, and its motive was to show the value of “critical, adversarial research” after retail traders upended the market in a rebellion against Wall Street short sellers. Individual investors piled into beaten-down stocks such as GameStop Corp. last month to send shares soaring, leading some short sellers to abandon their bets entirely after incurring massive losses.

“Everyone is angry, and right now we believe it is important to explain the role short sellers play in a healthy, functioning market,” Hindenburg said in its Clover report.