Clover Health (NASDAQ:CLOV) is losing its sponsor and must fly on alone. Chamath Palihapitiya, the “SPAC King” who brought CLOV stock public in early 2021 at about $16 per share (it’s now at $1.86), has cut his stake in the Medicare Advantage provider to less than 5%. He may have gotten as little as $1.55 per share for some of his stock.
Despite this, Clover was up in pre-market trading on Sept. 30 and continued the trend this morning. Analysts are asking why.
Inside Clover Health
There are excuses for the failures of all Palihapitiya’s special purpose acquisition companies (SPACs). He can still draw headlines, but he’s no longer a billionaire.
I have written about Clover Health in the past with some approval. It offers an app call the Clover Assistant that can help manage chronic conditions like diabetes. The man behind the curtain is Andrew Toy, who officially takes the CEO chair in January.
But all the happy talk disguises poor results. The company has never shown a profit. During the first half of 2022 it lost $180 million, or about 38 cents per share, on revenue of more than $1.7 billion.
Toy blamed Covid-19, which “has shattered actuarial science,” causing far more severe disease and death than could have been predicted. The next year should be more predictable, he says, and that should mean better results.
But can Clover get there? It had only $324 million in cash at the end of June. The fourth quarter is when marketing costs are highest and decisions are made on the next year.
What Happens Next for CLOV Stock?
If Toy is right, Clover Health could have a good 2023. Covid-19 has given insurers pricing power, and costs should be lower as the pandemic becomes endemic.
The best hope for investors is still a sale to a deep-pocketed tech company or major insurer. Toy is a former manager at Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL). It would be wrong to speculate, which may be why Palihapitiya is seeking pastures new.
On the date of publication, Dana Blankenhorn held a long position in GOOGL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
