UNITED STATES DISTRICT COURT
`MIDDLE DISTRICT OF TENNESSEE
`NASHVILLE DIVISION
`
`
`
`
`Plaintiff,
`
`Case No.
`
`
`
`CLASS ACTION
`
`COMPLAINT FOR VIOLATIONS OF THE
`FEDERAL SECURITIES LAWS
`
`JURY TRIAL DEMANDED
`
`
`TIMOTHY BOND, individually and on
`behalf of all others similarly situated,
`
`
`
` v.
`
`CLOVER HEALTH INVESTMENTS,
`CORP., CHAMATH PALIHAPITIYA,
`VIVEK GARIPALLI, and ANDREW TOY,
`
`
`
`
`Defendants.
`
`
`
`Plaintiff Timothy Bond (“Plaintiff”), by and through his attorneys, alleges upon personal
`
`knowledge as to his own acts, and upon information and belief as to all other matters, based upon
`
`the investigation conducted by and through his attorneys, which included, among other things, a
`
`review of documents filed by Defendants (as defined below) with the United States Securities
`
`and Exchange Commission (the “SEC”), news reports, press releases issued by Defendants, and
`
`other publicly available documents, as follows:
`
`NATURE AND SUMMARY OF THE ACTION
`
`1.
`
`This is a federal securities class action on behalf of all investors who purchased or
`
`otherwise acquired Clover Health Investments, Corp. (“Clover” or the “Company”) (formerly
`
`known as Social Capital Hedosophia Holdings Corp. III (“SCH”) common stock between October
`
`6, 2020 and February 3, 2021, inclusive (the “Class Period”). This action is brought on behalf of
`
`the Class for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the
`
`“Exchange Act”), 15 U.S.C. §§ 78j(b) and 78t(a) and Rule 10b-5 promulgated thereunder by the
`
`SEC, 17 C.F.R. § 240.10b-5.
`
`Case 3:21-cv-00096 Document 1 Filed 02/05/21 Page 1 of 20 PageID #: 1
`
`

`

`2.
`
`According to the Company’s recent SEC filings, Clover purports to be “a next-
`
`generation Medicare Advantage insurer” that seeks to “leverage [its] flagship software platform,
`
`the Clover Assistant, to provide America’s seniors with PPO and HMO plans that are the obvious
`
`choice for Medicare-eligible consumers.” Clover is headquartered in this jurisdiction, with its
`
`principal executive offices located at 725 Cool Springs Boulevard, Suite 320, Franklin,
`
`Tennessee 37067.
`
`3.
`
`On October 6, 2020, Clover issued a press release announcing plans to become a
`
`publicly traded company via a merger with SCH. SCH was setup as a special purpose acquisition
`
`company (also known as a SPAC). SCH’s shares traded on the New York Stock Exchange under
`
`the ticker symbol “IPOC.” Clover’s October 6, 2020 release provided, in relevant part, that the
`
`transaction valued Clover at an enterprise value of approximately $3.7 billion, and the
`
`transaction was expected to deliver up to $1.2 billion in gross proceeds.
`
`4.
`
`On January 7, 2021, Clover and SCH announced that their anticipated business
`
`combination had been completed, and shares of Clover would begin trading on NASDAQ under
`
`the ticker symbol CLOV the next day. During the Class Period, shares of IPOC/CLOV common
`
`stock traded as high as $17.45 each.
`
`5.
`
`On February 4, 2021, analyst Hindenburg Research published a report entitled
`
`“Clover Health: How the ‘King of SPACs’ Lured Retail Investors Into a Broken Business Facing
`
`an Active, Undisclosed DOJ Investigation.” In this report, Hindenburg “reveal[ed] how Clover
`
`Health and its Wall Street celebrity promoter, Chamath Palihapitiya, misled investors about
`
`critical aspects of Clover’s business in the run-up to the company’s SPAC go-public transaction
`
`last month.” Hindenburg stated that its investigation “spanned almost 4 months and has included
`
`more than a dozen interviews with former employees, competitors, and industry experts,” as well
`
`
`Case 3:21-cv-00096 Document 1 Filed 02/05/21 Page 2 of 20 PageID #: 2
`
`2
`
`

`

`as “dozens of calls to doctor’s offices, and a review of thousands of pages of government reports,
`
`insurance filings, regulatory filings, and company marketing materials.”
`
`6.
`
`Hindenburg continued: “[c]ritically, Clover has not disclosed that its business
`
`model and its software offering, called the Clover Assistant, are under active investigation by
`
`the Department of Justice (DOJ), which is investigating at least 12 issues ranging from kickbacks
`
`to marketing practices to undisclosed third-party deals, according to a Civil Investigative
`
`Demand . . . we obtained.” Hindenburg wrote that the DOJ’s “Civil Investigative Demand and
`
`the corresponding investigation present a potential existential risk for a company that derives
`
`almost all of its revenue from Medicare, a government payor. Our research indicates that the
`
`investigation has merit.”
`
`7.
`
`On this news, shares of Clover common stock plummeted from their February 3,
`
`2021 closing price of $13.95 per share to just $12.23 per share on February 4, 2021, representing
`
`a one day drop of approximately 12.3%. This represents a loss of approximately $700 million in
`
`market capitalization. Moreover, shares traded as low as $11.86 per share intraday on February
`
`4, 2021.
`
`8.
`
`Throughout the Class Period, Defendants made materially false and misleading
`
`statements regarding the Company’s business. Specifically, Defendants made false and/or
`
`misleading statements and/or failed to disclose that: (i) Clover was the recipient of a Civil
`
`Investigative Demand from the DOJ; (ii) much of Clover’s sales are driven by a major related
`
`party deal that Clover not only failed to disclose but took active steps to conceal; (iii) Clover’s
`
`subsidiary Seek Insurance failed to disclose its relationship with Clover and misled consumers as
`
`to its purported independence; (iv) Clover’s software was in fact rudimentary; and (v) as a result,
`
`the Company’s public statements were materially false and misleading at all relevant times.
`
`
`Case 3:21-cv-00096 Document 1 Filed 02/05/21 Page 3 of 20 PageID #: 3
`
`3
`
`

`

`JURISDICTION AND VENUE
`
`9.
`
`The federal law claims asserted herein arise under §§ 10(b) and 20(a) of the
`
`Exchange Act, 15 U.S.C. § 78j(b) and 78t(a), and Rule 10b-5 promulgated thereunder by the
`
`SEC, 17 C.F.R. § 240.10b-5, as well as under the common law.
`
`10.
`
`This Court has subject matter jurisdiction over this action pursuant to 28 U.S.C.
`
`§1331 and § 27 of the Exchange Act, 15 U.S.C. § 78aa.
`
`11.
`
`This Court has jurisdiction over each Defendant named herein because each
`
`Defendant is an individual or corporation who has sufficient minimum contacts with this District
`
`so as to render the exercise of jurisdiction by the District Court permissible under traditional
`
`notions of fair play and substantial justice.
`
`12.
`
`Venue is proper in this District pursuant to § 27 of the Exchange Act, 15 U.S.C.
`
`§ 78aa and 28 U.S.C. § 1931(b), as the Company has its principal executive offices located in
`
`this District and conducts substantial business here.
`
`13.
`
`In connection with the acts, omissions, conduct and other wrongs in this
`
`Complaint, Defendants, directly or indirectly, used the means and instrumentalities of interstate
`
`commerce, including but not limited to the United States mail, interstate telephone
`
`communications and the facilities of the national securities exchange.
`
`PARTIES
`
`14.
`
`Plaintiff Timothy Bond acquired and held shares of Clover at artificially inflated
`
`prices during the class period, and has been damaged by the revelation of the Company’s material
`
`misrepresentations and material omissions.
`
`15.
`
`Defendant Clover Health Investments, Corp. purports to be a Medicare
`
`Advantage insurer that uses its software platform, the Clover Assistant, to provide America’s
`
`seniors with PPO and HMO insurance plans. Clover common stock trades on the NASDAQ
`
`
`Case 3:21-cv-00096 Document 1 Filed 02/05/21 Page 4 of 20 PageID #: 4
`
`4
`
`

`

`stock exchange under the ticker “CLOV.” The Company’s headquarters are located at 725 Cool
`
`Springs Boulevard, Suite 320, Franklin, Tennessee 37067, and the Company is incorporated
`
`under the laws of the State of Delaware.
`
`16.
`
`Defendant Chamath Palihapitiya has served as SCH’s CEO and Chairman of
`
`SCH’s Board of Directors since October 2019. Since the January 7, 2021 business combination,
`
`Defendant Palihapitiya has acted as a senior advisor to Clover’s management.
`
`17.
`
`Defendant Vivek Garipalli co-founded Clover and has served as Clover’s CEO
`
`and a member of the Company’s Board of Directors since July 2014. He also previously served
`
`as Clover’s President from July 2014 to March 2019.
`
`18.
`
`Defendant Andrew Toy has served as Clover’s President since March 2019, as
`
`Clover’s Chief Technology Officer since February 2018, and as a member of the Company’s
`
`Board of Directors since November 2019.
`
`19.
`
`Defendants Palihapitiya, Garipalli, and Toy (referred to as the “Individual
`
`Defendants”), because of their positions at the Company, possessed the power and authority to
`
`control the content and form of the Company’s annual reports, quarterly reports, press releases,
`
`investor presentations, and other materials provided to the SEC, securities analysts, money and
`
`portfolio managers and investors, i.e., the market. The Individual Defendants authorized the
`
`publication of the documents, presentations, and materials alleged herein to be misleading prior
`
`to its issuance and had the ability and opportunity to prevent the issuance of these false
`
`statements or to cause them to be corrected. Because of their positions with the Company and
`
`access to material non-public information available to them but not to the public, the Individual
`
`Defendants knew that the adverse facts specified herein had not been disclosed to and were being
`
`
`Case 3:21-cv-00096 Document 1 Filed 02/05/21 Page 5 of 20 PageID #: 5
`
`5
`
`

`

`concealed from the public and that the positive representations being made were false and
`
`misleading. The Individual Defendants are liable for the false statements pleaded herein.
`
`SUBSTANTIVE ALLEGATIONS
`
`20.
`
`Clover was founded in 2013 by Defendant Garipalli. The Company sells
`
`Medicare insurance and offers software to physicians that helps aggregate data on patients who
`
`are part of the Clover network.
`
`21.
`
`Shares of IPOC went public in April 2020, when SCH sold 72 million units at
`
`$10.00 each. SCH detailed that it was a “newly incorporated blank check company, incorporated
`
`as a Cayman Islands exempted company for the purpose of effecting a merger, share exchange,
`
`asset acquisition, share purchase, reorganization or similar business combination with one or
`
`more businesses.”
`
`MATERIALLY FALSE AND MISLEADING STATEMENTS
`
`22.
`
`The Class Period begins on October 6, 2020, when Clover and SCH announced
`
`their plan to enter into a merger through which Clover would become a publicly-traded company.
`
`Clover described itself in this release as “a next-generation Medicare Advantage insurance
`
`company offering best-in-class plans that combine wide access to healthcare and rich
`
`supplemental benefits with low out-of-pocket expenses. A unique model in health insurance,
`
`Clover partners with primary care physicians using its software platform, the Clover Assistant,
`
`to deliver data-driven, personalized insights at the point of care.”
`
`23.
`
`The proposed merger valued Clover at $3.7 billion, and noted that Clover was
`
`expected to receive up to $728 million of transaction proceeds and that up to $500 million of
`
`cash proceeds were expected to be allocated to existing Clover shareholders.
`
`24.
`
`In this October 6, 2020 release, Clover and SCH further provided:
`
`
`Case 3:21-cv-00096 Document 1 Filed 02/05/21 Page 6 of 20 PageID #: 6
`
`6
`
`

`

`Technology is at the core of Clover’s business – the Company is a true innovator
`in the Medicare Advantage space, deploying its own internally-developed software
`to assist physicians with clinical decision-making at the point of care.
`
`Clover’s flagship platform, the Clover Assistant, aggregates millions of relevant
`health data points – including claims, medical charts and diagnostics, among others
`– and uses machine learning to synthesize that data with member-specific
`information. This provides physicians with actionable and personalized insights at
`the point of care, offering suggestions for medications and dosages as well as the
`need for tests or referrals, among others, to ultimately improve health outcomes.
`The Clover Assistant enables a virtuous growth cycle, whereby improved health
`outcomes lead to superior economics that the Company shares with members
`through lower costs and rich benefits. In turn, the Company believes its best-in-
`class plans will continue to deliver market-leading growth, allowing the Clover
`Assistant to capture and synthesize more data and ultimately drive better care.
`
`
`*
`
`*
`
`*
`
`
`Today, Clover is the fastest growing Medicare Advantage insurer in the United
`States – among insurers with more than 50,000 members – and serves more than
`57,000 members in 34 counties across 7 states. Spurred by favorable demographic
`tailwinds and its differentiated, technology-driven approach, Clover has captured
`an average of 50 percent of the net increase in membership across its established
`markets over the last three years. Further, the Company’s software-centric approach
`enables efficient expansion into new markets, including to historically underserved
`and rural communities. The Company plans to expand into an additional 74
`counties and eighth state next year and recently announced a new partnership with
`Walmart to make joint Clover-Walmart plans available to half a million Medicare-
`eligibles in eight Georgia counties.
`
`Clover’s management team, led by CEO and Co-Founder Vivek Garipalli and
`President and Co-Founder Andrew Toy, will continue to lead Clover following the
`transaction. Chamath Palihapitiya, Founder and CEO of SCH, will act as a senior
`advisor to the Company’s management.
`
`25.
`
`In this October 6, 2020 press release, Defendant Toy stated: “I believe that more
`
`and more doctors are embracing the Clover Assistant because it allows them to focus on what
`
`they want to do, which is to look after patients. Importantly, the platform is empowered by a
`
`closed feedback loop, linking clinical data and physician action, which improves continuously
`
`as membership grows, allowing us to constantly evolve new ways of helping physicians and
`
`their patients.”
`
`
`Case 3:21-cv-00096 Document 1 Filed 02/05/21 Page 7 of 20 PageID #: 7
`
`7
`
`

`

`26.
`
`Also on October 6, 2020, SCH and Clover filed the Agreement and Plan of
`
`Merger as an Exhibit to a Form 425 Prospectus with the SEC. Sec. 4.30(a) (“Healthcare
`
`Compliance”) of this Agreement and Plan of Merger provided, in relevant part, that “[e]ach of
`
`[Clover] and its Subsidiaries (i) in all material respects meets and complies with, and since
`
`January 1, 2018, has met and complied with, all applicable Laws, including all Health Care
`
`Laws, and other requirements for participation in, and receipt of payment from, the Medicare
`
`Advantage Program . . . .” Elsewhere in the Agreement and Plan of Merger, “Health Care Laws”
`
`is defined to include, inter alia, the Federal False Claims Act, the Federal Anti-Kickback Law,
`
`and many other related laws.
`
`27.
`
`Sec. 4.30(d) of the Agreement and Plan of Merger provided, in relevant part, that
`
`“[s]ince January 1, 2018 . . . (iii) each of [Clover] and its Subsidiaries has implemented and
`
`maintained a compliance program, including policies, procedures and training, intended to
`
`ensure compliance with all applicable Health Care Laws . . . .”
`
`28.
`
`Also on October 6, 2020, Defendant Palihapitiya appeared on CNBC in an
`
`interview announcing the Clover-SCH transaction. Defendant Palihapitiya stated that Clover
`
`was not engaged in the practice of “upcoding,” or inputting inaccurate medical information to
`
`increase reimbursement from government payors such as Medicare. He said of Clover, in
`
`relevant part: “They create transparency. They don’t play games. They don’t motivate doctors
`
`to upcode or do all kinds of things in order to get paid.” Defendant Palihapitiya also said during
`
`this interview that SCH was “really excited after months of diligence and work to announce [the]
`
`merger between IPOC and Clover Health to take Clover Health public.”
`
`29.
`
`On October 20, 2020, SCH filed a Form S-4 Registration Statement with the SEC.
`
`In this document, SCH and Clover represented that they had discussed “typical due diligence,”
`
`
`Case 3:21-cv-00096 Document 1 Filed 02/05/21 Page 8 of 20 PageID #: 8
`
`8
`
`

`

`and that “[f]rom August 25, 2020 to August 28, 2020,” SCH, Clover, and their legal
`
`representatives “held a meeting via video teleconference to discuss certain preliminary
`
`healthcare regulatory and compliance due diligence matters, given the regulated nature of
`
`Clover’s business.” This document further provided that on August 27, 2020, SCH’s legal
`
`counsel was “provided with access to a virtual data room of Clover and began conducting a
`
`preliminary legal due diligence review of Clover.” The document further provided that
`
`representatives of SCH and Clover met several other times to discuss, inter alia, due diligence
`
`review and matters associated therewith.
`
`30.
`
`This October 20, 2020 Form S-4 Registration Statement further provided that, in
`
`reaching its recommendation to pursue the business combination with Clover, its Board:
`
`[C]onsidered the scope of the due diligence conducted by SCH’s senior
`management and outside advisors and evaluated the results thereof and information
`available to it related to Clover, including: (a) extensive virtual meetings and calls
`with Clover’s management team regarding its operations, projections and the
`proposed transaction; and (b) review of materials related to Clover and its business,
`made available by Clover, including financial statements, material contracts, key
`metrics and performance indicators, benefit plans, employee compensation and
`labor matters, intellectual property matters, real property matters, information
`technology, privacy and personal data, litigation information, healthcare matters
`and other regulatory and compliance matters and other legal and business diligence.
`
`31.
`
`In the October 20, 2020 Form S-4 Registration Statement, Clover also
`
`represented that “[w]e work diligently to ensure compliance with all applicable laws and
`
`regulations.” Clover repeated this same sentence in several other public SEC filings during the
`
`Class Period, including in at least the January 13, 2021 Form S-1 Registration Statement and the
`
`January 29, 2021 Form 424B3 Prospectus.
`
`32.
`
`On November 19, 2020, SPH filed a presentation with the SEC entitled “Clover
`
`Health: A Deeper Dive.” This presentation lauded Clover’s “Virtuous Growth Cycle.” The
`
`presentation further asserted that “Physicians Value the Clover Assistant,” and that “[i]n ~2 years
`
`
`Case 3:21-cv-00096 Document 1 Filed 02/05/21 Page 9 of 20 PageID #: 9
`
`9
`
`

`

`since product launch, we’ve built a broad base of engaged physicians. Given our software-driven
`
`approach, we believe we can scale these results rapidly within existing and new markets.” In this
`
`presentation, Clover further stated that physicians were “[i]ncentivized to use [Clover’s] highly
`
`delightful tech platform . . . that suggests personalized care recommendations at the point of
`
`care” and that the platform was “[d]esigned to work with any PCP and remove financial concerns
`
`from clinical decision-making.”
`
`33.
`
`On January 6, 2021, SCH announced that its shareholders voted to approve of the
`
`proposed business combination with Clover, and that the transaction was expected to close the
`
`next day.
`
`34.
`
`On January 7, 2021, Clover and SCH announced the completion of the business
`
`combination. Defendant Garipalli said in this release: “[a]s a public company, we will continue
`
`to pioneer a fundamentally different approach in the Medicare Advantage and Medicare space –
`
`investing in technology and partnering closely with physicians to help them make critical
`
`decisions for their patients at the point of care – with an overarching commitment to creating
`
`value for all stakeholders.”
`
`35.
`
`The statements described above were materially false and misleading and failed to
`
`disclose material adverse facts about the Company’s business, operations, and prospects. As
`
`discussed below, the Defendants misled investors by misrepresenting and/or failing to disclose
`
`that: (i) Clover was the recipient of a Civil Investigative Demand from the DOJ; (ii) much of
`
`Clover’s sales are driven by a major related party deal that Clover not only failed to disclose but
`
`took active steps to conceal; (iii) Clover’s subsidiary Seek Insurance failed to disclose its
`
`relationship with Clover and misled consumers as to its purported independence; (iv) Clover’s
`
`
`Case 3:21-cv-00096 Document 1 Filed 02/05/21 Page 10 of 20 PageID #: 10
`
`10
`
`

`

`software was in fact rudimentary; and (v) as a result, the Company’s public statements were
`
`materially false and misleading at all relevant times.
`
`36.
`
`The statements described in ¶¶ 22, 24-32, and 34 were materially false and
`
`misleading and failed to disclose material adverse facts about the Company’s business,
`
`operations, and prospects.
`
`THE TRUTH EMERGES
`
`37.
`
`On February 4, 2021, analyst Hindenburg Research published a report entitled
`
`“Clover Health: How the ‘King of SPACs’ Lured Retail Investors Into a Broken Business Facing
`
`an Active, Undisclosed DOJ Investigation.” In this report, Hindenburg “reveal[ed] how Clover
`
`Health and its Wall Street celebrity promoted, Chamath Palihapitiya, misled investors about
`
`critical aspects of Clover’s business in the run-up to the company’s SPAC go-public transaction
`
`last month.” Hindenburg stated that its investigation “spanned almost 4 months and has included
`
`more than a dozen interviews with former employees, competitors, and industry experts,” as well
`
`as “dozens of calls to doctor’s offices, and a review of thousands of pages of government reports,
`
`insurance filings, regulatory filings, and company marketing materials.”
`
`38.
`
`Hindenburg continued: “[c]ritically, Clover has not disclosed that its business
`
`model and its software offering, called the Clover Assistant, are under active investigation by
`
`the Department of Justice (DOJ), which is investigating at least 12 issues ranging from kickbacks
`
`to marketing practices to undisclosed third-party deals, according to a Civil Investigative
`
`Demand . . . we obtained.” Hindenburg wrote that the DOJ’s “Civil Investigative Demand and
`
`the corresponding investigation present a potential existential risk for a company that derives
`
`almost all of its revenue from Medicare, a government payor. Our research indicates that the
`
`investigation has merit.”
`
`
`Case 3:21-cv-00096 Document 1 Filed 02/05/21 Page 11 of 20 PageID #: 11
`
`11
`
`

`

`39.
`
`In its report, Hindenburg provided a link to a partially-redacted version of the
`
`Civil Investigative Demand that Hindenburg had obtained. The Civil Investigative Demand
`
`provided that the DOJ was engaged in “a False Claims Act investigation” that “generally
`
`concerns whether Clover Health Investment Corporation and/or related entities improperly
`
`induced patient referrals for services paid for by Federal agencies.” Among the 12 specific topics
`
`that the DOJ sought information from Clover on where: (a) Clover’s payments to healthcare
`
`providers to induce those providers to recruit patients to Clover’s Medicare Advantage plans; (b)
`
`Clover’s activities intended to encourage providers to refuse to accept patients with non-Clover
`
`coverage; (c) Clover’s payments to providers’ staff and employees . . . for conveying any
`
`information relating to Clover plans to patients in providers’ offices; (d) payments related to
`
`Clover Assistant; (e) Clover’s patient recruitment efforts; (f) Clover’s activities relating to
`
`matching patients with Medicare Advantage plans; and (g) the “Seek Medicare” online platform.
`
`40.
`
`Hindenburg continued that “Clover claims that its best-in-class technology fuels
`
`its sales growth. We found that much of Clover’s sales are driven by a major undisclosed related
`
`party deal and misleading marketing targeting the elderly. These practices should not come as a
`
`surprise, given that in 2016, Clover was fined for misleading marketing practices by the Centers
`
`for Medicare & Medicaid Services (CMS). The fine was issued after Clover’s repeated failure
`
`to amend misleading statements about its plan offerings. A former employee told us the fine was
`
`so small it just emboldened Clover to push the envelope further.”
`
`41.
`
`In its report, Hindenburg further flagged Clover’s “thinly-disclosed subsidiary
`
`called ‘Seek Insurance.’” Hindenburg noted that “Seek makes no mention of its relationship with
`
`Clover on its website yet misleading advertises to seniors that it offers ‘independent’ and
`
`‘unbiased’ advice on selecting Medicare plans. [Seek] claims, ‘We don’t work for insurance
`
`
`Case 3:21-cv-00096 Document 1 Filed 02/05/21 Page 12 of 20 PageID #: 12
`
`12
`
`

`

`companies. We work for you’, despite literally being owned by Clover, an insurance company.
`
`[Seek’s] activities are also under investigation by the DOJ.”
`
`42.
`
`Hindenburg further noted that “[m]ultiple former employees explained that much
`
`of Clover’s sales are fueled by a major undisclosed relationship between Clover and an outside
`
`brokerage firm controlled by Clover’s Head of Sales, Hiram Bermudez. One former employee
`
`estimated Bermudez drove ~68% of Clover’s total sales, though was unclear on the amount
`
`coming from the undisclosed relationship. One of the former employees [interviewed by
`
`Hindenburg] explained that Clover’s Head of Sales took efforts to conceal the relationship by
`
`putting it in his wife’s name ‘for compliance purposes’. Insurance filings confirm this. The
`
`Clover contract was quietly put into his wife’s name in the weeks after Clover’s go-public
`
`announcement.”
`
`43.
`
`According to Hindenburg, “[i]n a CNBC interview announcing the Clover
`
`transaction, Chamath proclaimed, unprompted, ‘they create transparency . . . they don’t motivate
`
`doctors to upcode or do all kinds of things to get paid”. A former employee explained to us that
`
`the DOJ is specifically asking about upcoding, or the practice of overbilling Medicare.” Indeed,
`
`“[m]uliple former employees explained” to Hindenburg “that Clover’s software is primarily a
`
`tool to help the company increase coding reimbursement.”
`
`44.
`
`Furthermore, Hindenburg wrote that “according to doctors and former employees
`
`we interviewed,” physicians use Clover’s software “because Clover pays them extra to use it.
`
`Physicians are paid $200 per visit to use the software, twice the normal reimbursement rate for
`
`a Medicare visit.” Rather than being “delight[ed]” by Clover’s technology, “[d]octors at key
`
`Clover providers described the software as ‘embarrassingly rudimentary’, ‘a waste of my time’
`
`and as just another administrative hassle to deal with.”
`
`
`Case 3:21-cv-00096 Document 1 Filed 02/05/21 Page 13 of 20 PageID #: 13
`
`13
`
`

`

`45.
`
`Hindenburg also noted that Palihapitiya’s firm, Social Capital Hedosophia
`
`Holdings, invested just $25,000 and agreed that Palihapitiya would promote the Clover Health
`
`SPAC in exchange for an eventual 20.5 million in “founders shares” (worth approximately $290
`
`million today).
`
`46.
`
`On this news, shares of Clover common stock plummeted from their February 3,
`
`2021 closing price of $13.95 per share to just $12.23 per share on February 4, 2021, representing
`
`a one day drop of approximately 12.3%. This represents a loss of approximately $700 million in
`
`market capitalization. Moreover, shares traded as low as $11.86 per share intraday on February
`
`4, 2021.
`
`47.
`
`On February 5, 2021, Clover issued two press releases in which the Company
`
`announced, inter alia, that : (1) that Clover had received a letter from the SEC “indicating that
`
`[the SEC] is conducting an investigation and requested document and data preservation for the
`
`period from January 1, 2020, to the present, relating to certain matters that are referenced in the
`
`article; and (2) Defendant Palihapitiya and Clover “were fully aware of the DOJ inquiry,” but
`
`made the affirmative decision to not publicly disclose this information.
`
`CLASS ACTION ALLEGATIONS
`
`48.
`
`Plaintiff brings this action as a class action pursuant to Rule 23 of the Federal Rules
`
`of Civil Procedure on behalf of a class of all persons and entities who purchased or otherwise
`
`acquired Clover common stock between October 6, 2020 and February 3, 2021, inclusive.
`
`Excluded from the Class are Defendants, directors and officers of the Company, as well as their
`
`families and affiliates.
`
`49.
`
`The members of the Class are so numerous that joinder of all members is
`
`impracticable. The disposition of their claims in a class action will provide substantial benefits to
`
`the parties and the Court.
`
`
`Case 3:21-cv-00096 Document 1 Filed 02/05/21 Page 14 of 20 PageID #: 14
`
`14
`
`

`

`50.
`
`There is a well-defined community of interest in the questions of law and fact
`
`involved in this case. Questions of law and fact common to the members of the Class which
`
`predominate over questions which may affect individual Class members include:
`
`a. Whether Defendants violated the Exchange Act;
`
`b. Whether Defendants omitted and/or misrepresented material facts;
`
`c. Whether Defendants’ statements omitted material facts necessary to make the
`statements made, in light of the circumstances under which they were made, not
`misleading;
`
`d. Whether Defendants knew or recklessly disregarded that their statements were
`false and misleading;
`
`e. Whether the price of the Company’s stock was artificially inflated; and
`
`f. The extent of damage sustained by Class members and the appropriate measure
`of damages.
`
`51.
`
`Plaintiff’s claims are typical of those of the Class because Plaintiff and the Class
`
`sustained damages from Defendants’ wrongful conduct alleged herein.
`
`52.
`
`Plaintiff will adequately protect the interests of the Class and has retained counsel
`
`who are experienced in class action securities litigation. Plaintiff has no interests that conflict
`
`with those of the Class.
`
`53.
`
`A class action is superior to other available methods for the fair and efficient
`
`adjudication of this controversy.
`
`FRAUD ON THE MARKET
`
`54.
`
`Plaintiff will rely upon the presumption of reliance established by the fraud-on-
`
`the-market doctrine that, among other things:
`
`a. Defendants made public misrepresentations or failed to disclose material facts
`
`during the Class Period;
`
`b. The omissions and misrepresentations were material;
`
`
`Case 3:21-cv-00096 Document 1 Filed 02/05/21 Page 15 of 20 PageID #: 15
`
`15
`
`

`

`c. The Company’s common stock traded in efficient markets;
`
`d. The misrepresentations alleged herein would tend to induce a reasonable investor
`
`to misjudge the value of the Company’s common stock; and
`
`e. Plaintiff and other members of the class purchased the Company’s common stock
`
`between the time Defendants misrepresented or failed to disclose material facts
`
`and the time that the true facts were disclosed, without knowledge of the
`
`misrepresented or omitted facts.
`
`55.
`
`At all relevant times, the markets for the Company’s stock were efficient for the
`
`following reasons, among others: (i) the Company filed periodic public reports with the SEC;
`
`and (ii) the Company regularly communicated with public investors via established market
`
`communication mechanisms, including through regular disseminations of press releases on the
`
`major news wire services and through other wide-ranging public disclosures such as
`
`communications with the financial press, securities analysts, and other similar reporting services.
`
`Plaintiff and the Class relied on the price of the Company’s common stock, which reflected all
`
`information in the market, including the misstatements by Defendants.
`
`NO SAFE HARBOR
`
`56.
`
`The statutory safe harbor provided for forward-looking statements under certain
`
`conditions does not apply to any of the allegedly false statements pleaded in this Complaint. The
`
`specific statements pleaded herein were not identified as forward-looking statements when made.
`
`57.
`
`To the extent there were any forward-looking statements, there were no
`
`meaningful cautionary statements identifying important factors that could cause actual results to
`
`differ materially from those in the pu