Amateur investors, who shot up dismal stocks in companies like GameStop earlier this year, helped keep Clover Health stocks up more than 250 percent since the start of the year, from this week’s high.
The healthcare company, which offers Medicare insurance, went public by merging with a blank check company founded by venture capitalist Chamath Palihapitiya in early January. It has now become a favorite among retail investors who gather on the Reddit online forum.
Discussions about the stock tripled between Monday and Tuesday this week on the platform, while daily comments on Clover have increased 90 times since the beginning of the month, according to alternative data provider Quiver Quantitative.
After falling below much of the $ 10 mark in the past three months, stocks began to skyrocket. They rose 32 percent on Monday and 86 percent on Tuesday, while stock markets generally remained calm. Another 15 percent gain in early trading fizzled out on Wednesday, causing the stock to drop around 13 percent by lunchtime in New York.
The violent price movements show that after the rise of previously unloved stocks in January, such as the game retailer GameStop and the smartphone manufacturer BlackBerry, as well as other big leaps by the cinema operator AMC Entertainment, private investors can still leave their mark earlier this month.
“It’s a very different dynamic from January, when retail investors talked for weeks about AMC and GameStop and BlackBerry to create a surge,” said Ivan Cosovic, founder of data provider BreakoutPoint. “In this current environment, these mini-cycles are much shorter. AMC was the trigger last week to bring all of this back into focus. “
A month after Clover made its market debut, short seller Hindenburg Research released a report claiming that the company “lured retail investors into a broken business versus an active, undisclosed deal.” [Department of Justice] Detection”.
Clover Health denied many of the allegations, but the stock fell more than 12 percent on the day the report was released and continued to slide in the weeks that followed.
This again appears to have helped attract Redditors who previously had success against prominent short sellers, particularly in the case of GameStop. Palihapitiya is also popular with amateur investors.
Threads devoted to a potential short squeeze in Clover on r / WallStreetBets have surpassed both AMC and BlackBerry theme chains in popularity, according to Reddit data collector YoloStocks.
“It just defies all valuation metrics,” said Zhiwei Ren, portfolio manager at Penn Mutual Asset Management. “Basically, it means: Let’s see how high we can push this stock.”
The rise in Clover stock’s price is tiny compared to the year-to-date meme stocks GME and AMC, which are up more than 1,500 and 2,300 percent, respectively.
Some investors were preparing for the uptrend in Clover stocks to weaken and placed “short” bets that the stocks would fall. Last month, the total amount of Clover Health stock sold short rose nearly 10 million shares, an increase of 24.5 percent. According to financial data provider S3 Partners, about half of the build was added in short positions in the past week alone.
So far, this has proven to be painful. As long as the stock rises, the short sellers’ paper losses add up. On Tuesday, short sellers lost $ 438 million in mark-to-market losses in the stock. According to data from S3, those losses so far this year are $ 490 million.
The shares of the US fast food chain Wendy’s are also up more than 20 percent this week. It has been one of the top 10 most talked about stocks on Reddit for the past 24 hours. One Redditor wrote that he liked the stock in part because Wendy’s sells chicken products known as “tendies” – a term used to represent financial gains on the message board.