InsurTech Lemonade Raises $319M for IPO

Insurtech Lemonade, backed by SoftBank, raised $319 million late Wednesday, which was more than expected.

Source: Barron's | Published on July 2, 2020

Lemonade Insurtech

The New York startup sold 11 million shares at $29 each. This was above its $26 to $28 price range. Lemonade will trade Thursday on the New York Stock Exhange under the ticker LMND.

Goldman Sachs, Morgan Stanley, Allen & Co, and Barclays are the lead underwriters on the deal.

Lemonade is one of the best-known insurtechs, which refers to start-ups that use technology to upend the insurance model. These companies, typically backed by venture capitalists, use technology like artificial intelligence and machine learning to create savings and cost efficiencies. Other well-known insurtechs include Root Insurance and Hippo.

Launched in 2016, Lemonade provides insurance for renters and homeowners in the U.S. for stolen or damaged property as well as personal liability. The start-up uses machine learning to better evaluate risk and AI for claims processing, the S1 said. Lemonade has raised $480 million in funding, Crunchbase said. Investors include SoftBank, Sequoia Capital, General Catalyst Partners, Aleph, and XL Innovate, the filing said.

The Lemonade IPO comes as other new issues have delivered strong first-day performances. Vroom (VRM), an online used car seller, surged as much as 117% in its first day of trading on June 9. Shift4 Payments (FOUR) rocketed 44% when it went public on June 5.

Baillie Gifford, a U.K. investment manager, has indicated it wants to buy $100 million of Lemonade stock at the IPO price, the June 30 filing said. Baillie Gifford could not be reached for comment.

Lemonade co-founders Shai Wininger and Daniel Schreiber own the largest stakes in the company. Wininger, who is Lemonade’s president and chief operating officer, has 15.9 million shares, or 36.2% before the IPO. (The stake will fall to 29% after the IPO.) Schreiber, who is Lemonade’s CEO, has 15.5 million shares, or 35.3%. (The stake will drop to 28.3% after the IPO.)

SoftBank owns nearly 12 million Lemonade shares, or 27.3%. (Its stake will fall to 21.8% after the listing.) Sequoia Capital has about 4.5 million shares, or 10.3% before the IPO. (Its stake will fall to 8.3%.) Before the offering, General Catalyst owned 3.2 million shares, or 7.3%. (Its stake will drop to 5.9%.)

Lemonade isn’t profitable. The company reported that revenue more than doubled to $26.2 million for the quarter ended March 31, up from $11 million for the same period in 2019, the filing said. Net losses also increased, jumping 70% to $36.5 million for the quarter from $21.6 million for the same time last year.