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Tuesday, June 15, 2021

Clover Health’s Stock Price Surges After Becoming New Reddit Darling

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Shares of

Clover Health Investments Corp.

CLOV 69.29%

soared after emerging as the latest target for retail traders on Reddit forums.

The healthcare company’s share price rose over 90% on Tuesday, after jumping 32% Monday. It is currently being bought and sold above $22 a share, while it was valued at $7.64 at the end of last month. Over 125 million shares were traded on Monday, nearly an eightfold increase from Friday.

Clover Health went public Jan. 8 by merging with a special-purpose acquisition company, or SPAC. Founded in 2013, it provides private health insurance and Medicare plans.

The firm’s share price came under pressure several weeks later after Hindenburg Research put out a report alleging that it misled investors. Clover Health’s management disputed the report at the time. SPACs have since fallen out of favor among investors as inflation concerns spurred a shift away from growth stocks and many have seen sizable declines.

Some Reddit users are speculating that Clover Health could be a candidate for a short squeeze, which is characterized by a high level of investors betting on the stock to fall. If the share price rises significantly instead, short investors may be forced to buy the stock to cover their positions, which could accelerate the stock upward.

A proxy measure of short-interest, the percentage of shares outstanding on loan, is at 9.7%, according to data from

IHS Markit.

While this has more than doubled from March, it is far below levels previously seen for stocks such as

GameStop,

which was above 80% in January.

This isn’t deterring some Reddit users. “Apes who missed on $GME! Listen up, $CLOV is ready to lift off!” wrote one user who goes by u/pvr90 on Tuesday. Ape is a nickname for buyers of

AMC Entertainment Holdings Inc.

shares, which have been among the most actively traded meme stocks in recent weeks.

Unlike shares of AMC and GameStop, which are up nearly 2500% and 1400% this year respectively, as of Monday’s closing level, Clover is now up 27% for the year.

Others on Reddit are hoping that Clover Health could be added to the Russell 2000, a widely followed small-cap index, though it isn’t clear if this would be enough to support the rise in its share price.

Index provider FTSE Russell is adjusting the constituents of its indexes on June 25. The company said 38 new companies will be added to the Russell 2000, with 21 classified as healthcare. Funds that mimic widely followed indexes will have to buy shares added to the index.

The recent run up in GameStop and other stocks involves investors in opposing camps: traditional Wall Street firms and small investors who are bucking the system. WSJ asked the same series of questions to one of each about the role of WallStreetBets in the trading frenzy. Photo Illustration: Carlos Waters

Write to Anna Hirtenstein at anna.hirtenstein@wsj.com

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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