IPO 2.0
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IPO 2.0

IPOC = Clover Health???

Clover Health could be an ideal candidate to merge with Chamath Palihapitiya’s Social Capital Hedosophia Holdings Corp. III (NYSE: IPOC). So, is Clover Chamath’s next SPAC target?

Disclaimer: Base your investment decisions not on rumors only facts. I’m long Social Capital Hedosophia Holdings Corp. III (NYSE: IPOC) since its IPO.

According to a Bloomberg report, Clover Health, an insurance startup backed by Alphabet Inc. and Sequoia, is in advanced talks to go public through a merger with Social Capital Hedosophia Holdings Corp. III (NYSE: IPOC).

Clover, founded in 2013, sells Medicare insurance in largely rural or underserved areas. Alongside that insurance, it also offers software to physicians that helps aggregate key data on patients who are part of the Clover network. That data can, in turn, improve care and bring the cost of care down, the company argues.

Cash from the SPAC will fuel Clover Health’s growth beyond the more than 57,000 members it currently serves across seven states, the people said. That scale will help it achieve profitability, a goal it hopes to meet by 2023.

The deal includes up to $1.2 billion in cash proceeds, $400 million of which will be through a private investment in the public entity, or PIPE, led by Mr. Palihapitiya.

1. Alignment on mission

Social Capital’s mission is to advance humanity by solving the world’s hardest problems. One of those challenges is providing healthcare services to everyone. Its portfolio had a long focus on healthcare companies.

Here is Clover Health’s mission statement:

We have one goal — to improve the quality of life of our members and physicians.

It all starts with Clover’s insurance model. They try to align with physicians by reducing doctor-insurer friction and increasing visibility into the health of each patient, leading to improved care. Its physicians are able to focus on people, not paperwork.

Clover Health also offers preventive care by using patient-centered analytics and a dedicated care management team.

2. 10x Investment Opportunity

In a recent tweet, Chamath Palihapitiya made it clear that his investment strategy focuses only on high risk-reward opportunities. He tries to buy companies that have a potential to 10x in 10 years.

Clover Health could offer a potential 10x return in 10 years as the company is changing the healthcare industry in a massive way. The tech-enabled health insurer differentiates itself from incumbents by collecting and analyzing health and behavioral data to lower costs and improve medical outcomes for its members.

Some of the tailwinds that could offer a margin of safety are the following:

  1. Millennials demand healthcare services to be digital-first and individually tailored

2. The demand for high-quality healthcare services is continuously growing

In 2019, Clover Health had 40,000 members in Georgia, New Jersey, Arizona, Pennsylvania, South Carolina, Tennessee and Texas. The business earns roughly $10,000 in revenue per member from the Centers for Medicare and Medicaid Services, or currently about $400 million in annual revenue. As a Medicare Advantage plan, Clover Health makes a majority of its cash from the government.

On October 1st, Clover Health announced a new partnership with Walmart to offer Clover’s benefit-rich Medicare Advantage plans.

3. Prolific investors

Clover Health has raised a total of $925 million to date, garnering a valuation of $1.2 billion prior to its $500 million Series E funding in 2019. The company is backed by Alphabet’s venture arm GV, Sequoia Capital, Floodgate, Bracket Capital, First Round Capital, and more.

Deal details

According to The New York Times, the deal, which could be announced as soon as today on CNBC by Chamath Palihapitiya, would value Clover Health at $3.7 billion.

The deal includes up to $1.2 billion in cash proceeds, $400 million of which will be through a private investment in the public entity, or PIPE, led by Chamath Palihapitiya.

Cash from the SPAC should fuel Clover Health’s growth beyond the more than 57,000 members it currently serves across seven states. That scale will help it achieve profitability, a goal it hopes to meet by 2023.

We will definitely learn more about the newest development of this on CNBC at 8 am EST.

Chamath Palihapitiya [credit: CNBC]

Disclaimer: Base your investment decisions not on rumors only facts. I’m long Social Capital Hedosophia Holdings Corp. III (NYSE: IPOC) since its IPO.

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