A week after Chamath Palihapitiya, the Silicon Valley investor and SPAC kingpin, called short sellers “un-American” on CNBC, one of them has taken on a SPAC called Clover Health — which Palihapitiya took public last year.

Fellow short sellers are quietly cheering. 

Activist short-seller Hindenburg Research, which became famous last year for its work uncovering an alleged fraud at electric truck maker Nikola, claimed that Clover Health, a Medicare advantage plan, is under investigation by the Department of Justice. It showed a screenshot of the civil investigative demand to Clover that lists 12 specific areas of that investigation.

The stock fell 12.5 percent on the report, though Hindenburg said it had not taken a short position and was publishing to show the value of short sellers — and their research — in the market.

Hindenburg became the first of the activists to put out short research following the attack last week by the Reddit forum WallStreetBets on the short sellers of GameStop that led one of them, Melvin Capital, to lose about $6 billion and get a $2.75 billion bailout from Citadel and Point72 Capital.

[II Deep Dive: Buried in Reddit, the Seeds of Melvin Capital’s Crisis]

Many short sellers have said they went to cash during the fracas and were reluctant to publish new ideas. Some were also annoyed by Palihapitiya’s role in the GameStop saga — as the stock jumped after he said he bought calls — and by his remark that short selling seems un-American on CNBC.

Muddy Waters’ Carson Block retorted by calling Palihapitiya “SPAC Jesus” on Twitter and in a Bloomberg TV interview.

“He’s constantly making statements that position him as a man of the people when he’s really just trying to railroad them into his SPACs,” explained Block in a Twitter message to Institutional Investor. He said he had not read the Hindenburg report.

“We think Chamath has done a masterful job marketing himself, capitalizing on the recent chaos with GameStop and WallStreetBets to align himself with ‘everyday’ investors – but his public persona strikes us as the sugar that helps the poison go down,” the Hindenburg report said, calling Palihapitiya a “Wall Street celebrity promoter.” 

Palihapitiya, who has taken six SPACs public to great acclaim, did not respond to an email request for comment. In an email, a Clover Health spokesman said, “We will be issuing a statement to address the claims presented by Hindenburg,” but had not provided the statement by the time of publication. 


Short sellers have been skeptical of the SPAC boom and last year published research criticizing six of them. Hindenburg said its research predated the GameStop brouhaha.

“The name first crossed our radar in October 2020, when Chamath began a media tour explaining his reasoning for taking the company public via SPAC,” the Hindenburg report said. “Since then, while Chamath has seemingly taken every opportunity available to present himself as a beacon of rigorous due diligence and Wall Street know-how, our four-month investigation led us to conclude that Clover Health’s culture is rooted in deception and has taken every opportunity to push or break the rules to mislead its customers, investors, and Medicare.” 

Hindenburg added that “despite nearly four months of due diligence we performed and financed for this report, we have no position in Clover.”

“Why?” asked Hindenburg, which was founded by Nathan Anderson, who is relatively new to short selling but has been a due diligence expert and whistleblower for years. “Because while short selling is always high risk, these are unprecedented times; many people are angry and right now we believe it is important to demonstrate the role short sellers play in a healthy, functioning market.”

Hindenburg added that it had taken the profit motive of short selling “off the table” in this case, “so the investing public can more clearly see the work for what it is; deep-dive investigative research.” 

“Critical, adversarial research is needed because Wall Street is a finely tuned machine, built to sell securities to the public, regardless of quality. In short, the corporate world is rife with fraud, and investors have little protection,” the report said.

In a series of tweets detailing the research, Hindenburg wrote that on a CNBC interview “Chamath proclaimed, unprompted that Clover “create[s] transparency…[doesn’t] motivate doctors to upcode or do all kinds of things in order to get paid.”

But Hindenburg said “a former employee told us the DOJ is specifically asking about upcoding,” or overbilling Medicare. It noted the SPAC kingpin received more than 20 million founders shares in exchange for $25,000 — which is common for SPAC founders.

Palihapitiya’s supporters did not wait, jumping on Hindenburg’s Twitter post of the report. Anderson’s supporters did, too. 

“Haters gonna hate. Nate’s gonna Nate,” Block opined on Twitter Thursday morning.