• The Social Capital SPAC led by billionaire Chamath Palihapitiya is acquiring Clover Health in a $3.7 billion deal that’ll take the health insurance company public. 
  • In 2021, Palihapitiya projects the company will grow its membership roughly five times what it was this year.
  • Clover Health president and chief technology officer Andrew Toy said that projected growth largely comes from the potential participation in a new Medicare program that’s yet to be finalized. 
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Social Capital’s Chamath Palihapitiya is looking to acquire the health insurance company Clover Health via a SPAC. 

The special-purpose acquisition company Social Capital Hedosophia Holdings Corp. III will merge with Clover in a $3.7 billion transaction that’s slated to close in 2021, the companies said in a statement.

Clover offers private health-insurance plans for seniors, a product called Medicare Advantage. Competition is fierce for the more than 24 million Americans enrolled in Medicare Advantage plans, and for the thousands signing up daily as they turn 65. Startups like Clover are facing off against industry giants like UnitedHealthcare, Humana, and Aetna.

In a tweet Tuesday, Palihapitiya laid out his expectations of growth for Clover. By 2021, Clover’s membership is projected to be 273,000 people, roughly five times what it was at the middle of this year. Clover. That in turn would lead to revenue of $880 million, roughly double the company’s 2019 figures. Bloomberg News first reported that Clover was in talks to go public via the SPAC earlier on Tuesday.

The rapid expansion contrasts with the slower growth Clover has seen over the past few years.

Clover enrolled 39,400 members in 2019, 10,000 more than the year before. It signed on 54,400 people this year, according to Business Insider’s reporting. As of the

Clover Health Investments said it would go public by merging with special-purpose-acquisition company Social Capital Hedosophia Holdings Corp. III  (IPOB) – Get Report

The move gives Clover, the San Francisco Medicare-supplement provider, an enterprise value of $3.7 billion.

The deal would generate $1.2 billion in gross proceeds, including a PIPE — private investment in public equity — of $400 million from a number of investors and as much as $828 million of cash held in the Social Capital trust account. 

The venture capitalist Chamath Palihapitiya, founder and chief executive of Social Capital, will invest $100 million of the PIPE and will be a senior adviser to the new company’s management.

Clover will receive as much as $728 million of transaction proceeds. As much as $500 million of cash proceeds will be allocated to current Clover shareholders. Clover’s senior officers will roll all their equity into the new company.  

“We have made it our business to make healthcare affordable. Our technology helps doctors, leading to better outcomes and lower out-of-pocket expenses for members,” said Andrew Toy, president and co-founder of Clover. 

Clover’s software platform delivers data and personalized insights to primary-care doctors at the point of care. 

The platform aggregates millions of health-data points — including claims, medical charts and diagnostics — and uses machine learning to synthesize the data with “member-specific information,” the company said.

Clover serves more than 57,000 members across Arizona, Georgia, Mississippi, New Jersey, Pennsylvania, South Carolina, Tennessee and Texas. The company says it is the fastest growing Medicare Advantage insurer in the country among insurers with more than 50,000 members. 

In turn Medicare Advantage is one of the fastest growing markets in the U.S. healthcare system with a value of $270 billion today and an estimated value of $590 billion by 2025, the

Chamath Palihapitiya

Cameron Costa | CNBC

(This story is for CNBC Pro subscribers only.)

Chamath Palihapitiya just unveiled his next “10x idea” with his latest SPAC deal to take health care insurance startup Clover Health public.

Clover will go public via a merger with Social Capital Hedosophia Holdings Corp. III, a special purpose acquisition company. The deal values Clover at $3.7 billion and includes up to $1.2 billion in cash proceeds. The billionaire investor believes the company has the potential to generating returns worth 10 times the original investment. 

“What we have is a business that’s actually delivering the promise of technology-improving, better outcomes and lower cost health care,” Palihapitiya said on CNBC’s “Squawk Box” on Tuesday. It’s “a market that I think is huge and growing quickly” and a business “that is consistently taking share year over year over year.”

“This is one of the most straightforward investments I’ve ever made,” Palihapitiya said. He added by 2023 the company will have overall profitability. 

In a CNBC interview on Tuesday, Palihapitiya broke down his investment thesis in Clover, a seven-year-old company that sells Medicare Advantage in the U.S.

Here’s how the Social Capital CEO made the case and the slides he used to make it.

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Adds details on SPACs, context, share movement

Oct 6 (Reuters)Insurance startup Clover Health will go public through a merger with blank-check firm Social Capital Hedosophia Holdings Corp III IPOC_u.N in a deal valued at $3.7 billion including debt, the company said on Tuesday.

The combined cash-and-stock deal includes a $100 million investment from venture capitalist Chamath Palihapitiya and $50 million from Hedosophia.

Clover, whose investors include Alphabet Inc GOOGL.O and Sequoia Capital, is expected to receive up to $728 million of the proceeds, with up to $500 million allocated to existing shareholders.

Palihapitiya, who had also helped take Virgin Galactic public last year, is planning to raise a total of $2 billion through initial public offerings for three new blank-check firms.

In September, Opendoor Labs Inc, the home-selling platform backed by SoftBank Group 9984.T, agreed to go public through a merger with another blank-check company backed by Palihapitiya in a deal worth $4.8 billion.

Social Capital Hedosophia Holdings is a partnership between the investment firms of Social Capital and Hedosophia, and was listed earlier this year.

A blank-check company, also known as a special purpose acquisition company, uses capital raised through an initial public offering to buy a private company, usually within two years. The deal then takes the private company public.

Social Capital’s shares rose more than 5% in premarket trade.

(Reporting by Ambar Warrick and Niket Nishant in Bengaluru; Editing by Sriraj Kalluvila)

((Ambar.Warrick@thomsonreuters.com; +91-80-6182-2837; Reuters Messaging: ambar.warrick.thomsonreuters.com@reuters.net; Twitter: @AmbarWarrick))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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A “blank check company” led by the billionaire Chamath Palihapitiya is nearing a deal to acquire the Medicare insurance company Clover Health, according to people familiar with the matter. The deal, which could be announced as soon as Tuesday, would value Clover Health at $3.7 billion.

The deal is being done through a special-purpose vehicle, or SPAC, which uses public market funds to buy private companies and take them public. It is the third such deal done through Mr. Palihapitiya’s Social Capital Hedosophia fund, following the real estate start-up Opendoor and the space tourism company Virgin Galactic.

Clover, founded in 2013, sells Medicare insurance in largely rural or underserved areas. Alongside that insurance, it also offers software to physicians that helps aggregate key data on patients who are part of the Clover network. That data can, in turn, improve care and bring the cost of care down, the company argues.

Still, Clover, which touts its software as a distinguishing feature, has indicated that technology alone is not enough to sustain the company. Clover laid off about a quarter of its employees last year as it sought to focus on hiring health care experts in addition to technology developers.

Cash from the SPAC will fuel Clover Health’s growth beyond the more than 57,000 members it currently serves across seven states, the people said. That scale will help it achieve profitability, a goal it hopes to meet by 2023.

The deal includes up to $1.2 billion in cash proceeds, $400 million of which will be through a private investment in the public entity, or PIPE, led by Mr. Palihapitiya.

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