Reddit Enthused Trading Spreads to Clover Health as Shares Explode
Medicare insurance start-up Clover Health saw its shares explode over 100% on Tuesday as the company became the newest stock for discussion on Reddit’s WallStreetBets forum.
The forum has over 10 million participants and have made Clover Health their new favorite target.
The medicare insurance start-up, which went public via Chamath Palihapitiya’s SPAC,
soared over 100% on Tuesday after surging 32% in the previous session. The stock closed off the highest level of the day, but still registered a gain of 86%.
By Tuesday afternoon trading the stock had already traded over 650 million shares, 30 times more than its 30-day average volume of 22 million shares, according to FactSet. By the closing bell, more than 720 million shares had changed hands.
Clover Health has 43.5% of its float shares sold short, according to data from S3 Partners. That compares with about 18% short interest in AMC.
In the last week Reddit traders have also been helping to drive up movie theater chain stock AMC, which has soared over 110% this month so far.
“This looks like the perfect setup for a combined short and gamma squeeze. I see no reason why CLOV couldn’t reach the same price point as AMC did last week (>$70). It might even go higher than that,” one trending Reddit post read.
Shares of Clover had fallen earlier this year when short seller Hindenburg published a scathing report that called the company a “broken business.” Clover also revealed in February that it received a notice of investigation from the Securities and Exchange Commission and that it intends to cooperate.
“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 of S3 Partners. “But shorting into a rising market produces mark-to-market losses, and today’s price spike has resulted in big red numbers for short sellers.”
Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.