Clover Health under fire from Hindenburg, the research firm that took down Nikola

A report from Hindenburg Research on Thursday claimed that Clover Health is currently under active investigation by the Department of Justice, and that the company failed to disclose the investigation to investors before it went public last month.

According to Hindenburg’s report, which culminated a four-month probe by the firm, the DOJ is investigating 12 issues related to Clover, including its Clover Assistant software, kickbacks, marketing practices, and undisclosed third-party deals, all of which were referenced in a civil investigative demand letter.

In its own probe, Hindenburg said it found much of the company’s sales—up to two-thirds, a source estimated—are “driven by a major undisclosed related party deal” with an outside broker controlled by Clover’s head of sales.

Clover’s subsidiary, “Seek Insurance,” which Hindenburg said was “thinly disclosed,” is also allegedly under investigation by the DOJ.

“This 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,” Hindenburg wrote. Clover, a tech-focused health insurance group, manages Medicare plans for low-income clients and receives about $10,000 in annual revenue per patient from the Centers for Medicare and Medicaid Services.

Clover shares were down about 9% in midday trading following the report.

Reached for comment, the company said it plans to release a detailed response to Hindenburg’s report later today.

(Update: On Friday morning, Clover posted a point-by-point response to the report. It acknowledged that it knew about the DOJ investigation, but said it did not believe it was required to disclose this information in its SEC filings. “We went through both an IPO and de-SPAC due diligence process, and this subject received extensive focus and attention,” the company wrote. “Consistent with the views of Clover’s outside counsel, Social Capital’s outside counsel, and independently retained outside counsel of third parties, including IPO underwriters’ counsel, we concluded that the fact of DOJ’s request for information was not material and was not required to be specifically disclosed in our SEC filings.” You can read Clover’s full response here.)

Hindenburg also took aim at Chamath Palihapitiya, a billionaire tech investor who brought Clover public last month through a merger with a special purpose acquisition company under his venture capital fund, Social Capital. The report accused Palihapitiya of misleading investors and, while it made no claims that he knew about the DOJ investigation, it called into question the extent of his due diligence before the merger.

Palihapitiya, a Silicon Valley celebrity who recently made headlines for backing the GameStop purchasing frenzy, acquired shares of Clover now worth $290 million in exchange for $25,000 and “promoting the Clover Health SPAC,” Hindenburg wrote.

Hindenburg, a noted short-seller, says it hopes to remind people of the key role short-sellers play in “exposing fraud and corporate malfeasance,” which historically includes takedowns of Enron, Lehman Brothers, Luckin Coffee, and Nikola.

This post has been updated with Clover’s response.