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Should Investors Be Worried About Clover Health's Class Action Lawsuits?

By Brian Orelli, PhD and Keith Speights - May 7, 2021 at 5:29AM

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Long-term investors should take a wait-and-see attitude.

Any time shares of a stock drop precipitously, lawyers are going to look for shareholders who might be interested in suing the company. In this video from Motley Fool Live, recorded on March 29, contributors Brian Orelli and Keith Speights discuss the prospects of Clover Health Investments (CLOV 6.11%), given the class action lawsuits that have been filed against it. Their conclusion: Long-term investors should take a wait-and-see attitude.

Brian Orelli: Ron wants to know whether there's any news on the class action lawsuit against Clover Health Investments, CLOV. I haven't heard any recent updates, but pretty much any time there's news, you end up with a bunch of lawyers looking for a class action lawsuit. Anytime a biotech drug fails, you almost always see class action lawsuits. It just feels like that's just lawyers trying to make money.

I'm a shareholder of Clover, I'm not particularly worried about the class action lawsuit. The results of the investigation by the government are going to be what they are, and it shouldn't matter too much about the class action lawsuits by the shareholders.

Keith Speights: You and I have talked about Clover Health in the past, and my take on it is just to reserve judgment. Let's wait and see [laughs] what happens. I'm like you, I'm not as worried about the class action lawsuit. We'll see what the government comes out with. I just don't think it'll be anything that seriously hurts Clover Health. They could get dinged, they could get their hand slapped, but I think the company will rock on.

Brian Orelli, PhD owns shares of Clover Health Investments and has the following options: short May 2021 $7.5 puts on Clover Health Investments. Keith Speights has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Clover Health Investments. The Motley Fool has a disclosure policy.

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