Clover Health Commences Class A Common Stock Offering; Shares Drop

Clover Health Investments (CLOV) has initiated an underwritten public offering of 35 million shares of its Class A common stock. Following the news, shares of the next-generation healthcare company dropped 9.1% in the extended trading session on Monday after closing 5.6% higher on the day.

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Details of the Offering

Along with the offering, Clover Health has granted underwriters a 30-day option to purchase up to 5.25 million additional shares of the common stock.

The company plans to use the net proceeds of this offering as working capital and for general corporate purposes. Notably, Citigroup (C) and Deutsche Bank (DB) Securities are serving as joint book-running managers for the offering.

Earnings Snapshot

Recently, Clover Health posted upbeat revenues for the third quarter of 2021. Total revenues of $427.2 million surpassed analysts’ expectations of $417.8 million and more than doubled on a year-over-year basis. The company recorded a normalized Medicare Advantage (MA) Medical Care Ratio (MCR) of 94.8%, compared to 96.4% in the same quarter last year. (See Clover Health stock charts on TipRanks)

For 2021, the company projects total revenues to be in the range of $1.42 billion to $1.47 billion. Normalized MA MCR is expected to be in the range of 94% to 96%. Additionally, normalized adjusted EBITDA loss is forecast to be between $250 million and $230 million.

Analysts Recommendation

Recently, a Credit Suisse analyst maintained a Hold rating and a price target of $9 (19.05% upside potential) on the stock.

In September, Cowen & Co. analyst Gary Taylor initiated coverage of the stock with a Sell rating and a price target of $7 (7.4% downside potential).

Taylor is skeptical regarding the company’s core business thesis that its Clover Assistant and the unmanaged FFS physician practices will result in best-in-class care management and per-capita medical costs.

Overall, the Street is bearish on the stock and has a Moderate Sell consensus rating based on 2 Holds and 1 Sell. The average Clover Health price target of $8.67 implies 14.68% upside potential to current levels. Shares have decreased 24.3% over the past year.

Smart Score

Clover Health gets a 1 out of 10 on TipRanks’ Smart Score ranking system, suggesting that the stock is likely to underperform market expectations. (See Top Smart Score Stocks on TipRanks)