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A short seller vs. Chamath Palihapitiya

February 5, 2021, 3:56 PM UTC

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It’s the special purpose acquisition craze meeting the GameStop insanity.

On Thursday, Hindenburg Research, the short-selling firm known for flagging issues with electric car company Nikola last year, released a report targeting Chamath Palihapitiya-backed Clover Health and called it a “broken business.”

The insurance startup agreed to go public via merger with Palihapitiya’s Social Capital Hedosophia III in October. “This is one of the most straightforward investments I’ve ever made,” Palihapitiya said at the time of the announcement.

But on Thursday, Hindenburg Research’s report argued Clover Health was not so straightforward: Among other issues, the short-activist group accused the company of fueling sales using misleading marketing to elderly people and alleged that Clover did not disclose a Department of Justice investigation into the company’s sales practices.

Clover Health hit back at Hindenburg in a lengthy post Friday, accusing the short seller of “sweeping inaccuracies and gross mischaracterizations.” While the DoJ had submitted inquiries to the company, Clover Health downplayed the issue, characterizing it as a regular occurrence in the industry that it did not consider material to its investors.

But since the release of Hindenburg’s report, Clover Health has received a notice of investigation from the Securities and Exchange Commission, the company revealed too. Shares of Clover Health were down 13% Friday.

Here’s the big surprise about Hindenburg’s report: While short sellers typically release such papers alongside a bet against the company, Hindenburg has no position in the company. Long or short. Instead, the report seems to address the recent flare-up in criticism against short sellers, even though Hindenburg says it began looking into the business some four months ago: “We think in this moment for public markets, it is more important for people to understand the role short sellers play in exposing fraud and corporate malfeasance.”

As investors flooded into GameStop shares last week, short sellers were heavily targeted by retail traders. Palihapitiya meanwhile positioned himself on the side of the retail traders in much of the saga.

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Lucinda Shen
Twitter: @shenlucinda
Email: lucinda.shen@fortune.com

VENTURE DEALS

- Rad Power Bikes, a Seattle-based maker of electric bikes, raised $150 million. Investors include Counterpoint Global, Fidelity Management and Research Company, The Rise Fund, TPG, T. Rowe Price Associates, Durable Capital Partners, and Vulcan Capital. Read more.

- Top Hat, a Toronto-based courseware platform for higher education, raised $130 million in Series E funding. Georgian led the round.

- Class, a Washington D.C.-based maker of software for classes based on Zoom, raised $30.8 million in Series A funding.  Insight Partners and Owl Ventures led the round and were joined by investors including Reach Capital, Catalysis Capital Management, and Diligent Software.

- NexWafe, a German maker of silicon wafers, raised €10 million ($12 million) in Series B funding. Investors included Fraunhofer, Saudi Aramco Energy Ventures, GAP Technology Holding, Lynwood Schweiz AG, and Bantina Invest Limited.

- Gardyn, a Washington, D.C.-based maker of a way to grow food indoors and at home, raised $10 million in Series A funding. JAB Holding Company led the round.

- Storyblok, an Austria-based maker of CMS for developers and marketers, raised $8.5 million in Series A funding. Mubadala Capital led the round and was joined by investors including firstminute capital and 3VC

- Monkey, a São Paulo, Brazil-based marketplace for credit to small and medium enterprises in Latin America, raised $6 million in Series A funding. Quona Capital and Kinea Ventures led the round.

- Showbie, a Canadian maker of a app for classrooms, raised $7.5 million ($5.9 million) in additional Series A funding. ATB Private Equity led the extension.

- Bold, a Los Altos, Calif.-based maker of personalized exercise programs for older adults, raised $7 million in seed funding. Julie Yoo of Andreessen Horowitz led the round. Read more.

- Metalenz, a Boston-based maker of optic sensing tech, raised $10 million. Investors include 3M Ventures, Applied Ventures, Intel Capital, M Ventures, TDK Ventures, Tsingyuan Ventures, and Braemar Energy Ventures

- Tau, a Turin, Italy-based maker of a wire for e-mobility motors, raised about €6.8 million ($8 million)in additional Series A fudning. Investors included the Russian Direct Investment Fund.

- Iteratively, a Seattle-based customer data and analytics company, raised $5.4 million in seed funding. Gradient Ventures led the round and was joined by investors including Fika Ventures and PSL Ventures. Read more.

- Elucidata, a Cambridge, Mass.-based molecular data company, raised $5 million in funding. IvyCap Ventures led the round.

- Vested Finance, a San Francisco and Mumbai-based online investment platform, raised $3.6 million in seed funding. Investors included Moving Capital, Ovo Fund, TenOneTen Ventures, Inflection Point Ventures and Venture Catalysts.

- Latitude, a Provo, Ut.-based startup building games generated with A.I., raised $3.3 million in seed funding. NFX led the round and was joined by investors including Album VC and Griffin Gaming Partners. Read more.

- Mindstone, a London, U.K.-based based learning platform, raised $2.2 million in seed funding. Moonfire Ventures led the round and was joined by investors including The Fund, Zanichelli Venture, and Nex.D.

- Jack & Bry, a London-based maker of plant-based meat alternatives, raised £1.25 million ($1.7 million) in seed funding.  SFC Capital led the round and was joined by investors including  KM Capital and Rubix Ventures.

- Automotus, a Los Angeles-based maker of a video analytics platform that monitors curbside traffic, raised $1.2 million. Investors included Quake Capital, Techstars Ventures, Kevin Uhlenhaker (co-founder & CEO at NuPark, acquired by Passport), and Baron Davis.

PRIVATE EQUITY

- Stone Point Capital and Insight Partners agreed to acquire CoreLogic (NYSE: CLGX), the Irvine, Calif.-based real estate data firm, for about $6 billion.

- A $2 billion deal for CVC Capital Partners, Advent International, and Italy’s FSI fund to take a 10% stake in Serie A, the Italian soccer league, has reportedly raised concerns about a collapse, per Bloomberg. Read more.

- CVC Capital Partners is in talks to acquire a 15% stake in the San Antonio Spurs, the basketball franchise, in a deal that could value it at about $1.3 billion, per the Financial Times. Read more.

- Great Hill Partners invested £75 million ($103 million) to take a majority stake in BigChange, a U.K.-based mobile workforce management company focused on the transport sectors, valuing it at £100 million ($137 million)

- BBH Capital Partners made a minority investment in Clever Devices, a Woodbury, N.Y.-based provider of transportation solutions. Financial terms weren't disclosed.

- Nelson Global Products, backed by Wind Point Partners, acquired Commercial Tube Processing, an Indianapolis, In.-based maker of tube assemblies and metals. Financial terms weren't disclosed.

- Verista, a portfolio company of Lightview Capital, acquired Hawkins Point, a Westford, Mass.-based provider of life sciences business and technology services. Financial terms weren't disclosed.

- VMG Health, backed by Northlane Capital Partners, acquired Health Care Futures, a Minneapolis and Chicago-based business  consulting firm. Financial terms weren't disclosed.

- White Wolf Capital recapitalized JS Global, an Upper Marlboro, Md.-based provider of anti-terrorism and force protection construction services. Financial terms weren't disclosed.

EXITS

- Trafigura Group and Mubadala Investment are considering the sale of Minas de Aguas Tenidas, a Spanish copper mine, per Bloomberg citing sources. A deal could value the firm at around $3 billion. Read more.

OTHERS

- The European Union and U.K. are preparing to look into Nvidia’s (Nasdaq: NVDA) proposed $40 billion acquisition of Arm, a chipmaker, from SoftBank, per the Financial Times. Read more.

- Emerson Electric is considering a sale of Appleton Group, its electrical products unit, that could value it at $1 billion, per Bloomberg. Read more.

- Reliance Industries, the Indian conglomerate, plans to sell its interest in some oil and gas assets in the Marcellus shale in the United States for $250 million in cash to Northern Oil and Gas. Read more.

IPOS

- Atotech, a German chemicals company, raised $498 million in an offering of 29.3 million shares priced at $17, below its previously stated range of $19 to $22. Carlyle backs the firm. Read more.

- Bioventus, a Durham, N.C.-based maker of products for musculoskeletal conditions, now plans to raise $125 million. EW Healthcare Partners and Smith & Nephew back the firm. Read more.

SPACS

- Solera Holdings, a Westlake, Texas-based software company, is in talks to go public via merger with Apollo Strategic Growth Capital, per Bloomberg. Vista Equity backs Solera. A deal could value the firm at $6.5 billion. Read more.

- KKR Acquisition Holdings I, a SPAC by KKR, filed to raise about $1 billion. Read more.

- Vintage Wine Estates, a California-based winemaker, plans to go public via merger with Bespoke Capital Acquisition Corp., a SPAC listed in Toronto currently seeking list on the Nasdaq. The combination would value the business at $690 million.

- Hudson Executive Investment III, a SPAC by the team that took Talkspace public and is backed by Hudson Executive Capital, filed to raise $500 million. Read more.

- Slam Corp, a SPAC formed by Antara Capital and former Yankees player Alex Rodriguez, plans to raise $500 million. Read more.

- Apollo Strategic Growth Capital II, A SPAC from Apollo, now says it plans to raise $500 million, up from a previous $400 million. Read more.

- Centricus Acquisition, a SPAC led the round in part by the Chairman of Heritage Group Manfredi Lefebvre d’Ovidio, raised $300 million. Read more.

- Fifth Wall Acquisition Corp. I, a Los Angeles-based SPAC, raised $300 million. Read more.

- Northern Star Investment IV, a SPAC formed by the team that took BarkBox public, filed on Thursday with the SEC to raise up to $300 million in an initial public offering. Read more.

- Northern Star Investment III, a SPAC formed by the team that took BarkBox public, filed on Thursday with the SEC to raise up to $300 million in an initial public offering. Read more.

F+FS

- Top Tier Capital Partners, a San Francisco-based venture firm, raised $1.2 billion for Top Tier Venture Capital IX, Top Tier Venture Velocity Fund 3, and related separate accounts. 

- Gauge Capital, a Dallas-based private equity firm, raised $546 million for its third fund. Read more.

- Eurazeo, a Paris-based investment firm, raised €340 million ($409 million) as additional for its Eurazeo growth strategy. 

- SJF Ventures, a Durham, N.C.-based venture firm, raised $175 million for SJF Ventures V, an impact investment fund.

PEOPLE

- Tailwater Capital, a Dallas-based private equity firm, promoted Scott Peters, John Spradling, and Drew Winston to principal.