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Online insurance company Lemonade made it's NYSE debut on thursday, surging over 100%. The insurance tech, under the ticker $LMND uses artificial intelligence and “behavioral economics” via a mobile app for property insurance.

Lemonade IPO 2020

The consumer-focused application was in Forbes’ 2019 AI 50 list of America’s most promising artificial intelligence companies.

IPO Day One

Lemonade's stock opened at $50.06 on its first day of trading, almost 73 percent above its IPO price of $29 per share.  Lemonade closed at $69.41 up $40.41 or 139.34% on debut.

Lemonade IPO 2020 Debut

 

Day One: Lemonade Inc NYSE: LMND $69.41 +40.41 +139.34%

The IPO

“Investors are really quite warm to the idea of disruption in the insurance business,” says ays Lemonade’s chief financial officer, Tim Bixby. “We’ve been very resilient amid the pandemic—all of our key growth metrics continue to be strong,” he added.

The IPO raised raised $319 million through selling 11 million shares at $29 apiece, giving the company a valuation of around $1.6 billion, excluding underwriters’ options. Lemonade initially set its IPO price range between $23 and $26, before raising it to between $26 and $28 as demand for the shares picked up.

Lemonade's initial investors according to Lemonade’s SEC filing,

  • SoftBank will own a 21.8% in the company after the IPO on 
  • Hedge-fund Sequoia Capital 8.3%
  • Israeli venture capital fund Aleph 8.3%.
  • Lemonade’s two co founders, Daniel Schreiber and Shai Wininger, will hold a 28.3% and 29% stake, respectively.

It should be noted the valuation of around $1.6 billion is below the valuation from its latest round of private fundraising, led by SoftBank in April 2019 of $2.1 billion at the time. SoftBank has been somewhat the post child of bad investing with overvalued WeWork and Uber, that hasn't helped, but for now at least Lemonade seems to be a positive for the Japanese Bank.

About Lemonade

Lemonade was co-founded in 2016 by Daniel Schreiber and Shai Wininger and sets rates for the homes and renters it insures and is licensed as a property and casualty insurance carrier.

The company offers insurance to renters and homeowners using artificial intelligence and chatbots. Lemonade retains claim liability on its own balance sheet, allowing it to pay out insurance claims in a matter of minutes. The market it is targeting is younger, newer customers for profitability. Over 70% of customers are under the age of 35 and 90% are first-time buyers of insurance. “A core part of our strategy is to acquire younger buyers before they become attractive to larger insurers,” says Lemonade’s chief financial officer, Tim Bixby. “As those customers age, that drives up the value of their belongings, their need for insurance and the value to us.”

The company reported revenue of $67.3 million in 2019, 200 percent up from $22.5 million in 2018. The company has seen losses also increase in this p[hase from $52.9 million in 2018 to $108.5 million in 2019.

Bixby says that Lemonade is not profitable yet “by design,” as it is still heavily investing in growth and spending a good deal of money on marketing to attract new customers and  the company is “on the right track,” he says, pointing to Lemonade’s improving cash flow and operating margins in recent years. “

Bixby expects "Lemonade to be profitable in the medium term, but in the short term we see such an opportunity for customer acquisition.”

Lemonade which recently expanded into Europe is planning to eventually provide customers with more areas of coverage. It will launch pet insurance in the near future, while eventually hoping to add life insurance and auto insurance coverage for its customers.

Source: Lemonade, Reuters

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