Social Capital Hedosophia (NYSE: IPOC) are set to close in on their merger with Clover Health in early 2021. Evidently, this has caused a strong upswing in investor momentum in IPOC’s trading price. IPOC has gained 33% over the past week of trading and 66% for the month of December. The Special Purpose Acquisition Company (SPAC), IPOC is founded by billionaire Chamath Palihapitiya who has large plans for the healthcare company Clover. Furthermore, Chamath plans to bring strong returns for investors in years to come. With so much hype surrounding the merger and the next chapter of Clover Health, this article will breakdown everything you need to know.
Table of contents
Key details surrounding the merger
Firstly, the merger will finalise on the 8th of January when both companies will trade under the new ticker NASDAQ:CLOV. The transaction has an enterprise value of $3.7 Billion, which will provide $1.2 Billion in cash proceeds. Furthermore, Clover Health will receive $728 million of cash injections into the business. The additional $500 million of cash proceeds will be allocated to existing Clover shareholders. The merger aims to tap into the Medicare advantage market set to be worth $590 billion by 2025.
“We need companies like Clover to help fix our broken healthcare system. The Company’s rapid growth is a testament to the effectiveness of its tech-enabled approach, which resonates powerfully with consumers and physicians alike. I believe Clover is uniquely positioned to disrupt the entire Medicare Advantage market as well as expand into new and exciting opportunities in Original Medicare. I am proud to partner with Vivek, Andrew and the entire Clover team on the next phase of their mission to improve lives across the country.”Chamath Palihapitiya, Founder of IPOC on merger announcement.
What to expect from CLOV stock in 2021?
Clover Health is set to debut on Wallstreet on Friday the 8th of January. The debut will mark a new chapter for the healthcare innovator, especially with a healthy injection of cash into the business. Clover is the fastest growing Medicare Advantage insurer in the United States. The company serves more than 57,000 members in 34 counties and 7 states. Furthermore, with the strong revenue growth forecasted for 2021, it is clear why investors have jumped on board.
Revenue performance and forecasts for 2021
According to Woori BMO Group’s Head of Institutional Equity, Andrew Williams, Clover Health generated $462 million in revenue in 2019, an increase of 59% from 2018. According to Yahoo finance, the company is projecting revenues of $880 million with over 273,000 members in 2021. The most outstanding figure is the increase in members from what it stands today at 57,000.
The risks associated with SPAC pricing
As we have seen throughout 2020, more than a dozen popular SPAC’s have listed/merged their chosen companies on Wallstreet. The hype surrounding these high growth companies has seen extreme volatility reflecting in the share price, especially after the public listing. Investors in IPOC will need to remember that PIPE investors alongside some speculators will tend to sell their holdings after listing. The after listing volatility is something investors will need to evaluate and price into their risk strategy.
I am obliged to remind our viewers that this article is not financial advice but rather investment commentary from extensive research.
In conclusion, the merger set to conclude on the 8th of January is shifting investor sentiment for all the right reasons. The strong cash injection, industry growth and strong revenue forecasts are all strong signs for Clover Health moving forward. However, its important for investors to understand the volatility brought upon SPAC listed companies after listing. For long term shareholders, this will only create a buying opportunity in their opinion.
Written by Tyger Fitzpatrick, Founder of Youth Investment Group.
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The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.