Clover Health became a public-listed company via a January SPAC deal that was worth $3.7 B, and the company’s stocks have been volatile since then.
The stock of Clover Health (NASDAQ: CLOV) rose by 20% on Tuesday and by 9.50% on Wednesday as Reddit retail traders’ excitement rose even when the company confessed that it had become a short squeeze target. Clover Health’s shirt interest ratio currently stands at 26%. The outcome of the Redditor’s hype was a growth in the stocks of Chamath-backed health company. During the day, Tuesday, several discussions in the widely known forum among day traders suggested that the company’s stocks had become a short squeeze target. According to the company’s filing, Clover Health discouraged traders from indulging in the company’s stocks due to the short squeeze target issue. A company’s spokesperson was quoted saying that stock investors who purchased their Class A stocks risked losing their investments, due to the short squeeze target situation.
The Aftermath
Contrary to what everyone thought, the company’s stocks rose by 20% amid cheering from retail traders on several Reddit threads. The Redditors were excited as most hedge funds thought that the stock price would go down. Tuesday’s rally comes after another one that occurred earlier in the month when the company’s stocks rose by 89% in a single day. As per HypeEquity data, most of the trending discussions on Reddit included the word squeeze or short to describe Clover Health’s shirt squeeze situation.
Despite being warned of impending losses, Redditors wouldn’t hear any of it, and instead the desire to buy more stock was awakened. One Redditors, whose comment garnered 58K Karma points, was quoted saying that “I’m in!”. In the past Redditors have been known to target companies having high short volume ratios. As per Fintel.Io, Clover Health’s current ratio is 26%.
Another company, GameStop Corp (NYSE: GME) that pioneered meme stocks was shorted in a big way. Retail traders initiated a big rally in the company’s stocks forcing sellers to cover their open positions and losing billions in the process. A classic example is one company that was forced to close down after betting against GameStop. As per data sourced from Barclays, the meme craze has forced most bears in most companies to close their positions. However, not all companies, including Clover Health, have closed their positions. They still have high short-seller interest.
Clover Health’s Stock Future
Clover Health, a Chamath-backed private health solutions provider, became a public-listed company via a January SPAC deal that was worth $3.7 B, and the company’s stocks have been volatile since then. Hindenburg Research, a shirt seller, was responsible for the plummeting of the company’s shares after targeting it.
Having direct contracting initiatives with Medicare, Clover Health is definitely poised for growth. It’s also worth noting that the company used cautionary language to cushion investors against expected losses hence, a trustworthy company. At the end of the day, short squeezes are short lived, and when the squeeze period comes to an end stocks that had taken advantage of the situation plummet instantly.
Patrick is an accounting & economics graduate, a Cryptocurrency enthusiast, and a Blockchain technology fanatic. When not crafting informative pieces on any of the above subjects, he will be researching on how the Blockchain technology can transform the world, particularly the financial space.
