Clover Health’s outlook continues to darken as the company settles the first of several shareholder class-action lawsuits and struggles to remain listed on the Nasdaq stock exchange.
The health insurance startup agreed to pay $22 million to resolve shareholder allegations that it lied about a Justice Department investigation and its operations ahead of its initial public offering in 2021 through a special purpose acquisition company, Clover Health. committed securities fraud by failing to disclose other material information in announced Monday.
InsureTech faces similar federal class-action lawsuits in Delaware, New York and Tennessee.
There is no admission of guilt, subject to approval by the US District Court for the Middle District of Tennessee, Clover Health said in a news release. Clover Health said the company’s liability insurers would pay all but $2.5 million of the payout. The company is suing some of its insurers in Delaware state court to force them to cover the full amount.
Clover Health did not immediately respond to a request for an interview.
“It’s interesting to see that Clover was the first to settle,” said Ari Gottlieb, an independent health analyst at A2 Strategy Group. “This may reflect management’s interest in moving forward. But it also reflects the challenges that were present when Clover did the SPAC deal, which are now coming out and becoming more real.”
Additionally, Clover Health notified investors on Friday that it must raise its share price to $1 and maintain that value for 10 consecutive days by October 17, or it will lose its spot on the Nasdaq. The Medicare Advantage carrier will consider all options to remain listed, including a reverse stock split, according to a Securities and Exchange Commission filing. clover health announced a restructuring plan and layoffs Last week.
Shares of Clover Health start January 2021 at $15.30, following a $3.7 billion merger with social capital Hedosophia Holdings. The company’s stock opened Monday at 78 cents.