News & Analysis

Foxtrot Oscar! Controversial company led by controversial CEO gets meme stock high

Andrew Saks, Thursday, 10 June 2021

2021 has been a year of controversial behavior on the stock exchanges, largely driven by two sudden trends which took the corporate and stock trading world by storm back in January.

One was the so-called 'meme stock' phenomenon, which is an ultra-modern way of defining the performance of a company's stock that is hyped up and overbought by inexperienced investors, leading it to be overvalued, and the other was the increase in the number companies seeking to list their stock on publicly traded markets via major exchanges by using blank cheque SPAC companies to bypass the traditional due diligence procedures normally associated with Initial Public Offerings (IPOs).

SPAC stands for Special Purchase Acquisition Company, and is formal jargon for shell corporations listed on a stock exchange with the purpose of acquiring a private company, thus making it public without going through the traditional initial public offering process.

Both phenomena have led to a series of white-knuckle rides for stock traders over the past few months, a notable and unprecedented example was the GameStop meme stock short squeeze which resulted in a 1,500% increase in GameStop's share price over the course of two weeks, reaching an all-time intraday high of US$483.00 as of January 29, 2021, causing a number of brokerages to lock their customers out of their trading accounts, all of which are now being sued by their customers in a class action lawsuit in the United States.

Today, the meme stocks are at it again, this time involving NASDAQ-listed Clover Health Investments, which made its entrance to the publicly listed company arena in January this year via a SPAC merger, at the height of the SPAC rush and meme stock debacle.

Today, its stock has rocketed in value by 5.9% to an all time high since its January NASDAQ listing after soaring by over 80% earlier this week as retail traders on reddit turn their attention to new stocks to try to influence.

This newfound force which has placed the moving of entire markets into the hands of reddit subgroups is now expanding beyond the AMC and GameStop precedent-setters, and clearly reddit forum users are now able to demonstrate that they can create massive volatility in other meme stocks and as a result of the forum users' influence, Clover Health Investments stock rose to as mich as $28 during the morning session on Tuesday this week.

Clover Health's unconventional entry onto the stock exchange and the ensuing meme stock rush that it is now in the grip of goes hand in hand with its equally unconventional and blustery CEO, 42-year-old hotshot Vivek Garipalli.

Mr Garipalli lost his temper when Clover Health became the subject of investigation after facing army of short-sellers and investigations from the US regulatory authority the Securities and Exchange Commission and the US Department of Justice.

Unlike most CEOs responsible for public shareholder interests who find themselves under the microscope of the law and the authorities, Mr Garipalli did not put his head down and behave in a demure manner. Quite the opposite. He went into a full scale torrent of profanity, launching a curse word-infused tirade of abuse on a phone call to Forbes Magazine defending his company's position.

At that time, just a month after its SPAC listing took place and it became a fully fledged publicly traded entity on NASDAQ having completely bypassed the usual due diligence required by first tier exchanges, the US Department of Justice, the Securities and Exchange Commission and influential short-sellers began looking into Clover Health’s business practices, including how the company incentivizes doctors and patients to buy its insurance and use its technology.

After his diatribe of words which begin with the same letter as Forbes, the Forbes journalist asked if Mr Garipalli screams at his employees in the same method that he screamed at the Forbes journalist, and he shouted at high volume in response "NO! This is why I’m doing what I’m doing. I honestly, legitimately care about bringing value to consumers.”

At least he uttered one sentence without doing the Foxtrot.

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