Medicare Advantage Startup Clover Health Slated to Go Public in a $3.7 Billion SPAC Deal

Clover Health recently announced that it will go public through a merger with a special purpose acquisition company (SPAC), Social Capital Hedosophia Holdings Corp. III.

“Going public will enhance our ability to execute on our mission of improving every life, providing significant capital for the company to scale and improve health outcomes for seniors across the United States,” Andrew Toy, president of Clover Health, told Home Health Care News in an email.

Clover Health is a San Francisco-based Medicare Advantage insurer. The company’s in-home care model utilizes technology, including data analytics and machine learning, to identify its highest-risk members. It then finds solutions to lower their risk of adverse health events.

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Since its launch in 2013, Clover Health has raised more than $900 million. The company has 57,000 members across seven states.

The deal, which values Clover Health at $3.7 billion, is expected to provide up to $1.2 billion in cash proceeds. This includes up to $828 million of cash held in Social Capital Hedosophia Holdings’ trust account.

Additionally, Clover Health will receive up to $728 million of the transaction proceeds, and up to $500 million will go to the company’s existing shareholders.

Broadly, SPACs are an alternative to the traditional route to going public. SPACs raise money through an IPO and then search for an acquisition target. Once a merger has been completed, the target becomes a listed stock.

Over the past several years, Clover Health has been positioning itself to go public, according to Toy.

“We’ve generated incredible business momentum and have a well-defined and exciting growth strategy and a highly scalable approach,” he said. “We’ve also assembled a strong management team that has extensive experience across the health care and technology industries.”

As part of the transaction, Clover Health’s leadership team — including Toy and CEO Vivek Garipalli — will stay on and continue to serve in their roles. Chamath Palihapitiya, founder and CEO of Social Capital Hedosophia, will join Clover Health as a senior advisor to the management team.

The news of Clover Health’s plans to go public is fresh off the heels of a recent partnership with retail giant Walmart (NYSE: WMT). Last week, the company announced that it was teaming up with Walmart to make Medicare Advantage plans available in eight Georgia counties.

The Clover Health-Social Capital Hedosophia transaction is slated to close in the first quarter of 2021.

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