By Amrith Ramkumar


Shares of Clover Health are down about 10% premarket after Hindenburg Research released a report ( alleging that the health-care company's business is broken and that it is facing an undisclosed Department of Justice investigation.

Hindenburg is the firm that also published an investigation]( about electric-truck maker Nikola and its founder Trevor Milton last summer, causing the stock to crater and [leading to Mr. Milton's departure (

Both Clover and Nikola went public by combining with special-purpose acquisition companies, or SPACs, which are shell companies that go private to merge with a startup and take it public. SPACs have looser regulatory requirements than traditional initial public offerings, and critics worry that early stage companies going public could lead to losses for everyday investors.

Part of Hindenburg's report on Clover said the creator of the SPAC it merged with, venture capitalist Chamath Palihapitiya, misled investors about the company's business. Mr. Palihapitiya has created several SPACs in recent years and took space-tourism firm Virgin Galactic public in 2019. Another blank-check firm he created is merging with financial-technology firm Social Finance.


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(END) Dow Jones Newswires

February 04, 2021 09:30 ET (14:30 GMT)

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