Clover Health, an insurtech company for Medicare Advantage plans, will become publicly traded through a merger with special purpose acquisition company (SPAC) Social Capital Hedosophia Holdings Corp. III.
The two companies will combine through a mix of cash financing and stock, according to the announcement. The deal rates Clover at an enterprise value of about $3.7 billion and is expected to bring in $1.2 billion of gross proceeds. Clover will receive up to $728 million of the transaction proceeds, and up to $500 million of cash proceeds will go to existing Clover shareholders.
The transaction also includes a $400 million private investment in public equity (PIPE) at $10 per share. These funds include $100 million from Chamath Palihapitiya, the founder and CEO of Social Capital Hedosophia, $50 million from Hedosophia, and the remainder from investors including Fidelity Management & Research Company, Jennison, Senator Investment Group LP, Casdin, and Perceptive Advisors.
Clover’s leadership team, including CEO and cofounder Vivek Garipalli and president and cofounder Andrew Toy, will continue to lead the company following the transaction. Palihapitiya will act as a senior advisor when the deal closes in the first quarter of 2021 – subject to approval by Social Capital Hedosophia’s shareholders and other closing conditions.
WHY THIS MATTERS
Clover focuses on disrupting the Medicare Advantage space by integrating technology into its process. Since its founding in 2013, Clover has grown to serve more than 57,000 members in 34 counties across seven states.
Along with offering health plans, its platform, the Clover Assistant, combines health data with machine learning to provide physicians with patient insights at the point of care. It gives suggestions for medications, dosages, tests, referrals and others to help physicians improve health outcomes.
“I launched Clover eight years ago to fix fundamental flaws in our healthcare system, including unequal access, abysmal customer service and wasteful spending,” said Garipalli in a statement. “Chamath and the SCH team are fervent believers and true champions of Clover’s mission to improve every life.”
Palihapitiya has now completed three SPAC deals and has filed for three more, according to the U.S. Securities and Exchange Commission.
THE LARGER TREND
Clover made headlines last week for partnering with Walmart to offer Medicare Advantage plans in Georgia. The deal marked Walmart’s first venture into health insurance.
SPACs, or blank-check companies, operate by acquiring or merging with a company using the funds raised in its own initial public offering. Recently, they have experienced a rapid rise in popularity with more than 120 SPACs raising $49.1 billion in 2020 compared to 59 raising $13.6 billion in 2019.
Just last week, consumer-friendly telehealth and mail-order wellness product service Hims went public through a merger agreement with Oaktree Acquisition Corp. The deal places the combined entity at a roughly $1.6 billion valuation.
Outside of the rise of the SPAC, the public market has also been flush with digital health companies going public. This year alone, Amwell, GoodRx, Accolade, One Medical and Nanox all made their debuts as publicly traded companies.
ON THE RECORD
“We need companies like Clover to help fix our broken healthcare system,” Palihapitiya said in a statement. “The Company’s rapid growth is a testament to the effectiveness of its tech-enabled approach, which resonates powerfully with consumers and physicians alike. I believe Clover is uniquely positioned to disrupt the entire Medicare Advantage market as well as expand into new and exciting opportunities in Original Medicare. I am proud to partner with Vivek, Andrew and the entire Clover team on the next phase of their mission to improve lives across the country.”