Clover Health (CLOV) Shows 'Stock Market Detached From Reality', SPACs Need More Supervision, Says Billionaire Barry Sternlicht

June 23, 2021 10:07 AM EDT
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U.S. billionaire and co-founder of Starwood Capital Group Barry Sternlicht said special purpose acquisition companies (SPACs) need increased supervision from the U.S. Securities and Exchange Commission (SEC), citing Clover Health Investments Corp. (NASDAQ: CLOV) as a sign of a bubble.

“The stock market is detached from reality,” Sternlicht said at Bloomberg’s Qatar Economic Forum. “Clover Health Care is basically a fraud, is trading at $16 a share, and it keeps going up. The more you say it is going out of business, the higher the stock goes.”

Sternlicht noted five different SPAC mergers he’s been involved in since the start of the year, adding he hoped the trend had reached its peak.

“There is a trickle of deals getting done. I hope it remains a trickle. I doubt it will remain a trickle until the SEC tightens the process up because the projections that are in these -- there has to be someone saying they are reasonable because they are really misleading investors.”

SPAC deals experienced a boom in 2020 as companies saw an easier and less-scrutinized method to go public, in contrast to a traditional initial public offering (IPO).

“If you could breathe you could raise a SPAC,” added Sternlicht.

One of his SPACs, Jaws Juggernaut Acquisition Corp., secured $240 million in IPO last week and plans to use the proceeds to make acquisitions in the wireless communications industry.

U.S. Medicare Advantage insurer Clover went public last year with the help of SPAC advocate Chamath Palihapitiya. Since then, Clover has faced criticism from the investment research firm Hindenburg Research and is set to face a probe by the SEC.

In response, Clover argued that the Hindenburg report “is rife with ad-hominem attacks, sweeping inaccuracies and gross mischaracterization. It belies a desperate attempt for publicity while sacrificing any regard for the truth.”

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