One of the best IPOs of the year
Lemonade´s IPO ranked among the fastest-growing companies during the first day of its listing. IPO, which belongs to the insurance company Inari Medical Inc. focused on artificial intelligence, grew 73% to the price of 29 USD right after the market opening and closed the day 140% higher.
Lemonade builds on several IPO technologies that have met strong demand from public investors, such as ZoomInfo, which is an enterprise database provider or Vroom, an online sales company.
Lemonade, which is based in New York, was founded to create an online platform that provides to the tenants and homeowners information about insurance and the ability to bind coverage. Lemonade plans to expand its services to other insurance categories in the future. The company’s website uses machine-enabled chat robots to help potential clients obtain information and make purchases more quickly to properly cover their needs. The company is a public benefit company and strives to use the profits from insurance for donating to charity. By listing, the Lemonade has raised at least 480 million USD from investors, including major players such as SoftBank, Sequoia Capital, Aleph, XL Innovate and General Catalyst Partners. Lemonade first operated in the USA and then expanded to Germany and the Netherlands.
The company’s financial indicators show strong revenue growth, although they are slowing down.
Sales and marketing expenses as a percentage of total revenue are decreasing as revenue increases and sales and marketing efficiency increase.
The potential of different types of insurance is huge, but the question is how the company will be able to automatise more complex types of insurance, such as property, accident and special links.
As we can see in the attached chart – the value of Lemonade during the second trading day on the stock exchange increased again by more than 30%.
Unlike other insurance companies, Lemonade is a so-called full insurance company, which means that it takes the risk on its balance sheet and not transfer it to a more established insurer. In practice, it seems they have more control over their insurance and sell the policy, but it is a more capital-intensive business model.
An IPO with a large profit from the first day above the quoted price raises two questions among investors and the company. First, the high demand for IPO shares suggests that the company may have undervalued its shares and this obtained less money than they would have if they had set the price higher. Second, ordinary retail investors who could not purchase shares in the primary IPO, which was available only for privileged investors, can only sigh over “potential earnings.”