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Among the many blank-check IPOs this year, count insurer Clover Health among them. The startup offering Medicare Advantage plans will go public through a merger with a special purpose acquisition company created by Palo Alto-based VC Social Capital.

The deal will value Clover Health at $3.7 billion, raising $1.2 billion in proceeds. Of that, $828 million will come from the SPAC company, Social Capital Hedosophia Holdings Corp. III, and $400 million from private investors. Chamath Palihapitiya, the founder and CEO of Social Capital, said he would personally invest $100 million into the combined company.

“I have known (Clover CEO) Vivek for almost 10 years. As an investor, the most basic thing you need to know is this is the ultimate healthcare disruptor,” Palihapitiya said in an investor call on Tuesday. “We are going to fortify this balance sheet so Clover has the ability to aggressively build and expand all throughout America.”

Founded in 2014 by CEO Vivek Garipalli, Clover Health offers Medicare Advantage plans in 34 counties across seven states, with New Jersey being its largest market. Its plans had a three out of five Medicare star rating for 2020.

Unlike many other health insurance startups, which emphasize narrow-network plans to reduce costs, Clover Health has structured most of its plans as PPO networks. It touts a software tool it developed for primary care physicians as a way to reduce variability and healthcare costs.

It’s also had some bumps along the road. In 2018, the company lost its former CTO and COO in short succession. Clover later brought in Andrew Toy, who sold his previous startup to Google, as its CTO and president.  Last year, after raising $500 million, the company cut a quarter of its workforce, which it described as a restructuring to shift more of its resources toward expertise in the Medicare Advantage market.

Last year, the company brought in $462 million in revenue, an increase from $290 million in 2018. But it also posted a net loss of $60.57 million.

Looking to 2021, the company is expected to have revenues of $880 million and 273,000 members, according to a document Palihapitiya shared on Twitter. That’s more than four times its current membership of roughly 57,000.

Garipalli said Clover would use the funds to fuel the startup’s growth. It plans to expand into 74 more counties and an eighth state next year, and recently struck a partnership with Walmart Health to build plans that use the retailer’s new clinics in Georgia.

“Clover is the fastest growing Medicare Advantage plan with over 50,000 members. We haven’t done this just by adding new markets, but by taking significant incremental market share each year,” he said in an investor call. “We’ve spent our investments historically developing the platform and proving out our thesis. As we look to this round of capital, we believe a large portion will be used to fund accelerated growth going forward.”

Photo credit: aurielaki, Getty Images





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