- Clover Health shares surged 20% Tuesday amid hype from Reddit retail traders.
- Redditors on popular investing threads cheered the opportunity for a short-squeeze.
- The Chamath Palihapitiya-backed healthcare company has a 26% short-interest ratio.
- See more stories on Insider’s business page.
Redditors drove a new rally in shares of Chamath Palihapitiya-backed Clover Health Tuesday amid excitement over a short squeeze.
A number of discussions on the popular day-trader forum pointed to a Monday filing from the company that mentioned a short squeeze of the stock.
In the filing, Clover said cautioned traders from investing in the company’s stock because of speculation that it’s the target of a short squeeze.
“Investors that purchase shares of our Class A common stock during a short squeeze may lose a significant portion of their investment,” the company said.
Yet, the stock jumped 20% Tuesday as retail traders on Reddit investing threads cheered the opportunity to drive losses among short-focused hedge funds betting against Clover. The rally follows another surge earlier this month during which Clover shares soared more than 80% in a single day of trading.
On Reddit investing threads, about 12% of posts used the words “short” or “squeeze” in relation to Clover, according to data from HypeEquity.
Despite warnings of losses from the company, Redditors weren’t fazed – instead, they wanted to buy even more.
“I’m in!” said one Redditor with 58,000 “comment karma” points.
Redditors have been known to target companies with high short interest in the past, and Clover has a short volume ratio of 26%, according to data from Fintel.io.
GameStop, which first brought meme stocks into the spotlight earlier this year, was highly shorted. When retail traders caused a meteoric rally in the stock, short sellers were forced to cover their positions and lost billions. One hedge fund that bet against the company has closed down because of the losses.
The meme-stock craze has caused many short sellers to run from their bearish bets on small- to mid-size companies, according to data from Barclays. But there are still several companies, like Clover, with high short-seller interest.
Clover, which sells private health plans for seniors in the Medicare Advantage market and has backing from Chamath Palihapitiya, went public in a $3.7 billion SPAC deal in January. Since then, the shares have been volatile. Short-seller Hindenburg Research targeted the company in a February report, causing shares to plummet. Meanwhile, retail traders have poured into the stock, sparking several rallies.