WolfPack Research has published a damning investigation into MediaAlpha (NYSE:MAX), revealing a short position in MAX stock. In a detailed short report published on June 24, WolfPack alleged that the insurance lead-generation company is engaging in blatant consumer fraud.
The report states that MediaAlpha is guilty of providing deceptive information to consumers through advertising as a means of harvesting personal data which is then sold to scam companies. Today, MAX is falling fast on the news.
Right now, things aren’t looking good for MediaAlpha, a company that didn’t have much going for it to begin with. But if these allegations are true, MAX will have much further to fall as investors start to jump ship.
Inside the MAX Stock Short Report
MediaAlpha is a company that tends to fly under the radar and, while the company did beat Wall Street estimates for both EPS and revenue in May, shares have been declining steadily since its first-quarter earnings report. What’s more, since WolfPack published the report, MAX is down more than 4% and looks poised to keep falling.
This morning, WolfPack Research shared the report on X (formerly Twitter), revealing its short position and briefly laying out the case against MediaAlpha.
In a thread, the firm provided detailed evidence of its fraudulent activity accusations. WolfPack noted that its investigation is specifically into MediaAlpha’s health division, which accounts for 47% of the company’s revenue. Per the report:
“We believe MAX uses dishonest and sometimes outright fraudulent ads along with deceptive websites to trick consumers into providing their personal information in exchange for a health insurance ‘quote.” the short seller states. “MAX then sells this information as raw lead data or uses it to generate clicks or calls for its lead-buying partners. Our investigation indicates as much as 78% of MAX’s Health lead-buying partners are running boiler room health insurance scams or are flagrantly violating laws concerning telemarketing.”
WolfPack also revealed that, as part of its investigation, the firm created multiple aliases in order to demonstrate that MediaAlpha is selling leads to scam companies. These aliases received over 400 calls from telemarketers. The short seller notes that its team spoke to 50 of these callers, of which “45% gave fake insurance license numbers or hung up when asked” and 20% claimed to work for government agencies. WolfPack even provided a link to a YouTube video of audio recordings of these calls.
Finally, WolfPack highlighted misleading digital ads from MediaAlpha on “Bidencare Health Plans” that provided false information about a health insurance stimulus.
What It Means
As noted, MAX stock has been struggling for weeks, making it clear that its problems didn’t begin with the WolfPack short report. But the short seller makes a compelling case for fraudulent activity — a case that could easily spark further investigation.
If regulators come knocking, MediaAlpha will have much bigger problems than a short selling firm staking a bet against MAX stock. This suggests that shares are in for a difficult road ahead, particularly if more bears close in on the troubled company. What’s more, this short report is another compelling example of why short selling can be important for exposing companies engaged in illicit activity.
MediaAlpha could not be reached for a comment on the accusations made in the WolfPack Research short report.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
