Palihapitiya's $ 16 million wager on Clover price $ 682 million on the Reddit rally

© Reuters. FILE PHOTO: Chamath Palihapitiya, founder and CEO of Social Capital, speaks during the Sohn Investment Conference 2018 in New York City, the United States, April 23, 2018. REUTERS / Brendan McDermid

From Anirban Sen

(Reuters) – Serial trader Chamath Palihapitiya's $ 16 million investment in the special purpose vehicle (SPAC) that brought Clover Health Investments Corp public was worth $ 682 million on Tuesday after a Reddit-fueled rally in health insurer's shares .

Clover stock finished trading 86% on Tuesday as it became the latest "meme stock" to spark the imagination of amateur investors on Reddit and other social media platforms.

The stocks had underperformed the broader market, trading below the SPAC's IPO price since February when short seller Hindenburg Research accused Clover of hiding a Justice Department investigation into its business from investors.

Clover said the investigation was routine and not financially material to the disclosure. The US Securities and Exchange Commission has opened an investigation into Hindenburg's claims.

Palihapitiya, one of SPAC's most prolific sponsors, is now sitting on more than 4,000% paper earnings after Clover stock nearly doubled Tuesday, giving the company a market value of $ 9 billion and the value of its 21, The company increases its 3% stake according to Reuters calculations.

A Palihapitiya spokesman did not respond to a request for comment.

One third of Palihapitiya's stake in Clover is on as collateral. pledged Credit Suisse (SIX 🙂 for a loan shows a government filing. A six-month suspension that would prevent him from paying off his stake expired earlier this month.

Palihapitiya's stroke of luck isn't just due to the Reddit rally. SPAC managers are awarded warrants and founder's shares which result in them owning a much larger portion of the combined company than their investment would otherwise be due to them.

Palihapitiya brought Clover Health to the public through a $ 3.7 billion merger that closed in January. He has founded several so-called blank check firms that have merged with a variety of companies, including fintech startup Social Finance Technologies (SoFi), space tourism company Virgin Galactic Holdings (NYSE 🙂 Inc, and home-selling platform Opendoor Technologies Inc .

In early June, Palihapitiya launched four new non-warrant SPACs that aim to raise a total of $ 800 million through IPOs, with a focus on buying biotech companies.

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