Clover Health soars as it becomes new Reddit ‘memestock’ darling
Clover Health Investments Corp (NASDAQ:CLOV) has become the latest firm to benefit from the latest round of a Reddit-inspired trading frenzy from small investors as shares in the medical insurance group nearly doubled in value overnight.
The company ended Tuesday’s session in the US around 86% higher at US$22.15 as traders, many of whom are members of the Reddit forum r/wallstreetbets, piled into the stock.
Clover’s rally also showed signs of continuing on Wednesday morning, with the shares up 16% at a record high of US$25.73 in pre-market trading in New York.
The interest of the wallstreetbets community in Clover appears to be similar to that of other Reddit darlings AMC Entertainment Holdings Inc (NYSE:AMC) and GameStop Corp (NYSE:GME), namely that the stock is seeing large amounts of short selling activity from institutional investors betting that its price will decline.
In a post to the forum early on Wednesday morning, user u/Zewdle stated that Clover “is a very shorted stock currently” and that the recent surge in the price was an effort to put the squeeze on the short-sellers.
“Because [Clover’s] so highly shorted and we have a ton of Apes hoping on the stonk going to the moon, they’ve bet on it. Opening many contracts on the four-leaf clover”, the user said, with ‘Apes’ referring to users of the forum.
However, u/Zewdle also said that Clover may be different to other ‘memestocks’ that have benefited from the retail buying frenzy in the past, saying the firm has, in their opinion, “great fundamentals”.
The Reddit-inspired retail trading mob, which originally shot to prominence in late January during a buying frenzy over GameStop shares, has sparked several unexpected surges in value for a handful of companies over the first six months of the year as the cohort sought to inflict large losses on short sellers.
Aside from AMC and GameStop, other companies that have been targeted for the ‘short squeeze’ treatment have included mobile phone makers BlackBerry Ltd (NYSE:BB) and Nokia Oyj (NYSE:NOK).