Short-sellers are battening down the hatches as Clover Health Investments Corp. shares surge.
Traders betting against Clover have over the past week increased their short bets against the health care technology company by 4.5 million shares, worth $54 million, according to data from financial analytics firm S3 Partners. This as the stock has rallied 187%.
Source: FactSet
"Short sellers look to be shorting into a rising market and an overheated stock, looking for a pullback off of these elevated levels," said Ihor Dusaniwsky, S3’s head of predictive analytics. "But shorting into a rising market produces mark-to-market losses, and today’s [Tuesday’s] price spike has resulted in big red numbers for short sellers."
The 86% surge in Clover shares on Tuesday saddled short-sellers with $502 million in losses. They have lost $554 million this year.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| CLOV | CLOVER HEALTH INVESTMENTS CORP | 19.77 | -2.38 | -10.74% |
Short interest in the stock is $585 million, or 49.1 million shares, and accounts for 44% of the float, or shares available for trading.
Clover Health has in recent days become a favorite of the Reddit group WallStreetBets, which earlier this year was behind the big moves in shares of other so-called meme stocks like GameStop Corp. and AMC Entertainment Holdings Inc.
The group has in recent months made headlines by identifying stocks with heavy short interest and buying up shares to squeeze the price higher, forcing short-sellers to exit their positions.
The practice has drawn the attention of the U.S. Securities and Exchange Commission.
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"SEC staff continues to monitor the market in light of the ongoing volatility in certain stocks to determine if there have been any disruptions of the market, manipulative trading, or other misconduct," the SEC said in a statement on Monday. "We will act to protect retail investors if violations of federal securities laws are found."
