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Homelife insuranceGlobe Life stock drops 50% as short-seller alleges insurance fraud

Globe Life stock drops 50% as short-seller alleges insurance fraud

Shares of Globe Life, one of Texas’ largest insurance providers, dropped more than 50%, following a short position taken by Fuzzy Panda Research that alleged potential fraud at the company. Globe Life denied the allegations, and the stock recovered some of its losses Friday morning.
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Globe Life stock traded at $96 per share on Thursday morning. It fell sharply to $41 by the late afternoon. It was hovering around $49 per share early Friday morning, down 53% over the course of a day. And the stock was back to about $57 by mid-morning, up 15% on the day but still down down 40% over the course of about 24 hours.
The stock collapse initially wiped out $5 billion in market cap, The Wall Street Journal reports.
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Reuters reports that the-short seller uncovered “extensive allegations of insurance fraud ignored by management despite being obvious and reported hundreds of times.” That includes policies written for dead and fictitious people.
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Short-seller Fuzzy Panda’s report alleged that third-party policy sellers known to have committed insurance fraud contributed more 60% of new business at Globe Life’s American Income Life unit. That accounted for almost half of Globe Life’s total underwriting margins, Reuters reports. Fuzzy Panda’s allegations have not been independently verified.
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Globe Life denied the allegations in a statement.
“We reviewed the report and found it to be wildly misleading, mixing anonymous allegations with recycled points pushed by plaintiff law firms to coerce Globe Life into settlements,” the company said.
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Globe Life said the short-seller’s report was motivated by short-term profit gained on the backs of thousands of shareholders and customers.
Short-sellers are traders who bet that stocks will fall by borrowing shares and selling them high with the belief that they can be repurchased later at a lower cost.

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