Clover Health has settled lawsuits accusing the company of concealing a federal probe from investors during its initial public offering. The settlement resolves seven derivative lawsuits across multiple states, with no admission of liability. Clover Health will implement corporate governance improvements and enhance fiscal oversight. The settlement does not involve monetary payments, except for fees and expenses to the plaintiff’s counsel. The company aims to focus on its mission of improving members’ lives and achieving profitability, despite a decline in revenues from $874.4 million to $527.8 million in the first quarter of 2023.
Clover Health has announced a settlement in multiple lawsuits that accused the Medicare Advantage insurtech of failing to disclose a federal investigation to investors during its initial public offering. The company disclosed the settlement in a press release.
Shareholders had sued Clover Health, alleging that the company withheld information about an ongoing federal probe at the time of its IPO. In 2021, Clover Health went public through a merger with Social Capital Hedosophia, with a valuation of $3.7 billion.
According to the press release, Clover Health has reached an agreement in principle to resolve seven derivative lawsuits in Delaware, Tennessee, and New York. The settlement, subject to final court approval and definitive documentation, does not admit any liability or wrongdoing on the part of the defendants.
In the press release, Andrew Toy, CEO of Clover Health, expressed satisfaction with the settlement, stating that the resolution of the derivative lawsuits, combined with a previous settlement of the securities class action, allows the company to remain focused on its mission of improving the lives of its members and maintaining a strong business.
The lawsuits were initiated after news emerged about a month after the IPO that the Justice Department was investigating Clover Health for potential overbilling of Medicare Advantage.
As part of the settlement, Clover Health has committed to enhancing its fiscal oversight system. The press release stated that subject to negotiation of definitive documentation and final court approval, the defendants in the derivative lawsuits will receive customary releases, while the company will implement a range of corporate governance improvements.
Clover Health will not be making any monetary payment as part of the settlement, apart from fees and expenses to plaintiffs’ counsel, which are yet to be determined. The press release explained that the settlement was reached to avoid the burdens, expenses, and distractions associated with ongoing litigation.
In its first-quarter earnings report, Clover Health executives expressed optimism about the company’s future profitability, citing a medical cost ratio of 85.6% in the quarter, down from 96.4% in the previous year. The company has made significant progress in addressing its medical cost ratio, aiming to achieve its profitability goals. Losses decreased from $75.5 million in Q1 2022 to $72.6 million in Q1 2023.
However, Clover Health experienced a substantial decline in revenues, dropping from $874.4 million in Q1 2022 to $527.8 million in the first quarter of 2023.