Tech investor Chamath Palihapitiya bets big on Medicare Advantage provider
Conventional investor wisdom is to steer clear of next month's election, due to its inherent uncertainty and consequential volatility. But, this morning, Chamath Palihapitiya bet big on a company whose fortunes may be significantly impacted by the presidential victor.
Driving the news: Clover Health, a tech-enabled provider of Medicare Advantage plans, agreed to go public via a reverse merger with a Palihapitiya-led SPAC called Social Capital Hedosophia Holdings III (NYSE: IPOC).
- The deal values Clover at around $3.7 billion, inclusive of a $400 million PIPE.
- Clover had raised over $900 million in VC funding from firms like First Round Capital, Greenoaks Capital Partners, Sequoia Capital, and GV.
The politics: Both presidential candidates support Medicare Advantage, a program whereby private insurers provide extra benefits to seniors enrolled in Medicare (e.g., dental, vision, etc.).
- The big difference, however, is that Joe Biden wants to lower the Medicare enrollment age from 65 to 60 — which could result in nearly 20 million more eligible Medicare Advantage customers.
- He would, of course, need an amenable Congress.
Palihapitiya tells me that he struck the deal independent of politics.
- "More than 10,000 people turn 65 each day. Even if Biden doesn't win, that's around a billion dollars in new revenue possibly created each week, and Clover has a share of that, competing against companies like United Health and Humana. It doesn't take a genius to work out the compounding effect."
- The number of Medicare Advantage enrollees more than doubled between 2009 and 2019, and certain regulations were subsequently relaxed due to the pandemic.
- Palihapitiya adds that he kicked the tires on Clover during its Series A funding round in 2015, but passed. "I didn't understand Medicare Advantage yet and was just coming up to speed on the intricacies of Obamacare."
The bottom line: Medicare Advantage is likely to be a growing, lucrative business no matter who sits in the Oval Office for the next four years. But the degree of growth may be on the ballot.