Many insurance companies are using AI to compete with their competitors. Lemonade is targeting a $100 million IPO according to its filings. It is customary for insiders to wait 6 months to sell shares after an IPO. ... it priced its initial public offering at a range of $23 to $26. That number is imprecise, but directionally useful. The key element of the Lemonade ESG stock promotion is that the company claims to donate “excess profits” to charity. The company is valued at $2.1 billion and has raised a cumulative $480 million all the way through its Series D round. Strong investor demand drove shares up 139% on its first day of trading back in July 2020. Insurance provider and technology company Lemonade ... Strong investor demand drove shares up 139% on its first day of trading back in July 2020. Lemonade Announces Filing of Registration Statement for Proposed IPO Staff Writer | June 09, 2020 Lemonade, Inc. has filed a registration statement on Form S-1 with the U.S. Securities and Exchange Commission relating to the proposed initial public offering of its common stock. Dive Brief: Online insurance start-up Lemonade, the "Insurtech" backed by SoftBank Group, went public Thursday on the New York Stock Exchange and immediately became 2020’s best IPO debut. For example, companies that lobby against the use of slave labor score well in many ESG rankings. The company's revenue more than doubled in the first quarter of 2020 to $26.2 million. However, Lemonade is still in its early days and I expect its … The AI-enhanced upstart dealing in renters, homeowners, and pet health insurance made its public debut over the summer of 2020 with a … Please tell us what you liked about it. Free cash flow during the twelve months ended March 31, 2020, was negative ($79.9 million). The lockup is coming off at the same time that investors who made insane sums of money on short term call options in 2020 will have to pay taxes. Boeing Seen Getting Off Easy in Fraud Settlement on 737 Max, Indianapolis Neighborhoods Scanning Visitors' License Plates, New Law Cracks Down on Shell Companies to Combat Corruption, Indonesian Divers Find Parts of Plane Wreckage in Java Sea, TikTok Video Helps Louisiana Woman With Storm Claims, A Happy Hour with Kevin: Booze... the Webinar, Commercial Property Master Class - Causes of Loss Forms, Exclusions. Thank you! The reality is that Lemonade donates almost nothing to charity and its charity activities have been declining despite the company’s robust top-line growth. Shares of Lemonade currently trade at $125.11, making the company one of the best performing IPOs of the year. But not Lemonade. Lemonade is one of the many grand experiments in ESG – in both marketing tactics and in stock promotion tactics (the company even set itself up as a public benefit corporation, aka a hybrid for-profit / non-profit). Get the insurance industry's trusted newsletter. One of the most successful IPOs of 2020, Lemonade debuted on July 1 and by New Year’s Eve, it had risen close to 350%, including a 76.8% jump in December alone. If Lemonade had a better technological mouse trap and could find policies that were lower risk – it would want to hold onto all of that risk. The only thing proprietary about its business model is that it was backed by Softbank and therefore afforded the opportunity to burn wild amounts of cash at will. Yet on the day of its IPO, Lemonade restructured its entire business and essentially shifted all of its risk to reinsurance. 2, 2020, 01:24 PM. The legions of new retail traders that minted money in Lemonade call options this year owe significant amounts of short term capital gains taxes in a few months. After becoming one of the year's hottest IPO… The problem with these organizations gaining the kind of scale and revenue necessary to maintain and grow a publicly traded company is not the “Tech” but rather the “Insur”. As of March 31, 2020, Lemonade had $274.2 million in cash and $124.3 million in total liabilities. % of people found this article valuable. Thank you! Insurance provider Lemonade Inc. is trading more than 350% above its July 1 initial public offering price, the best of any 2020 debut above $300 million, according to data compiled by Bloomberg. 03, 2020 3:56 AM ET Lemonade, Inc. (LMND) By: David Jackson , SA News Editor 84 Comments So Lemonade partners with well known reinsurers such as Lloyds. Lemonade (NYSE:LMND) embodies this movement. This will be the second lockup expiration for the remaining two thirds of shares subject to the lockup agreement after the first expiry in November. Any other insurer could replicate its piddly charity contributions without denting their margins. Second, if Lemonade in its capacity as effectively a broker ends up sending too many bad policies to the reinsurers, the reinsurers can just cut Lemonade off. It would not take much for Alllstate or any other real insurance company to adopt Lemonade marketing tactics to help win over Millennials. So we are not writing this piece to take shots at ESG investing broadly. With the float now opening, we see this game reversing soon. Yet for the “low low cost” of $1 per customer per year, Lemonade got itself a nice multi-billion dollar ESG premium valuation. If Lemonade really had discovered a new technology that allowed it to keep its costs low, it would never want to share the spoils of that technology with reinsurers. Presently, the foundation consists of employees that work for Lemonade the public trading vehicle. Lemonade Announces Pricing of Initial Public Offering 07/01/2020 NEW YORK-- (BUSINESS WIRE)-- Lemonade, Inc. (“Lemonade”) today announced the pricing of its initial public offering of 11,000,000 shares of its common stock at a price of $29.00 per share. That, in conjunction with a much larger lockup release on 12/29 lead us to conclude that the stock will implode in short order. We believe this move was purely to amp up its appeal to ESG focused investors. The company makes absurd claims – that we think could even run afoul of insurance regulations – regarding its charity efforts, claiming that its commitment to donate excess profits to charity will result in its policyholders filing fewer fraudulent claims. We see extreme levels of selling and no one with a brain would buy this stock at even half of its current valuation given how out of synch the stock has gotten from fundamentals or reason. Shares grew 139% in its first day of trading. We of course doubt the NYSE’s flattering description of Lemonade had anything to do with courting its backers Softbank and Sequoia for their remaining stream of IPO listing business. The biggest FinTech IPO of 2020 lost around 20% of its share price on Monday (Dec. 28). Enter your email address to subscribe to this blog and receive notifications of new posts by email. For comparison, Allstate – a real insurance company that also does charity – in fact, far more charity than Lemonade – trades at about ~1x gross earned premiums (a proxy for revenue in an insurer). Insiders utilized an extremely shady lockup agreement so that they could start dumping shares immediately after the IPO. Therefore, if Lemonade wants to remain in the good graces of its reinsurance customers and to maintain current terms, it has a high incentive to deny as many claims as possible. Lemonade's 140% IPO debut was one of the best of 2020, but it raises questions Jul. But roughly 44 million additional shares — mostly held by insiders — will be eligible for sale on Tuesday, according to the IPO prospectus. Never mind that these outfits have no idea what Lemonade actually does (they actually view it as a technology company and appear to know absolutely nothing about the company’s reinsurance entanglements). Unfortunately, in some cases, financial charlatans and hucksters have hijacked the movement for self-enrichment. Required fields are marked *. Nothing prevents Lemonade from using this foundation for political lobbying efforts. Despite the acceleration over the past few weeks, Piper Sandler analyst Arvind Ramnani wrote in a note dated Dec. 15. that the firm remains positive “as the long-term opportunity for the company warrants an expanded multiple.”. It is trying to present itself as a friendly insurer that will not deny claims when in reality much larger and conservative reinsurance organizations are the ones that will call the shots and can quickly destroy Lemonade’s business with the stroke of a pen. Lemonade is an egregious stock promotion disguised as a social impact company – the company is making a complete farce of the ESG investment movement. It is worth noting that this specific structure is NOT a traditional 501(c)(3) – it is NOT a tax exempt organization, and the corporate structure – 501(c)(4) – was likely chosen because it provides Lemonade with the ability to use the foundation as a front for political lobbying activities and to engage in marketing activities to promote Lemonade products. There is no big addressable market story. Lemonade tried to IPO in 2019 and failed – after this IPO failure, in February 2020 the company created and allotted 500,000 shares to a 501(c)(4) entity called “Lemonade Foundation”. It is also worth remembering that Allstate has a real management team with extensive experience in insurance. By continuing to use our site, you accept our revised Privacy Policy. And money managers who believe in ESG and who have any desire to appear credible should be speaking out about companies such as Lemonade that are so obviously and blatantly abusing the ESG framework purely for self-enrichment purposes. Compare this to Lemonade which trades at 48x gross earned premiums. LMND, Late Wednesday, Lemonade priced its initial public offering at $29 a share, above the already increased IPO pricing to range of $26 to $28 … The stock rose modestly by 2020 IPO standards since then. The company’s charity activities are hot air. But 2020 is alive with … Lemonade does not even have to disclose the donors to this entity per the rules around these shadowy financing vehicles that are often the underlying entity behind political action committees or PACs. Essentially, the restructured business has Lemonade in almost a lead gen capacity – it finds leads, signs up an insurance policy, and then keeps a small fee for itself. Insurance company Lemonade's post-IPO lockup of insider stock selling is set to expire Tuesday. Its other co-founder was involved with Fiverr – a marketplace for freelance work. Some politicians have expressed distrust of ESG frameworks and certain influential Wall Street types have aggressively pushed back, espousing the benefits of ESG frameworks. Lemonade tried to IPO in 2019 and failed – after this IPO failure, in February 2020 the company created and allotted 500,000 shares to a 501(c)(4) entity called “Lemonade Foundation”. According to its S-1 filing with the U.S. Securities and Exchange Commission, it … The best-performing listing of 2020 is poised to enter the new year with extra volatility after insider selling restrictions expire this week. Your email address will not be published. Long-time insurance unicorn Lemonade has filed for its IPO. This recent addition to the MyWallSt shortlist is an insurance company that operates in the U.S., Germany, Netherlands, and France, using chatbots and AI. Even Trupanion, an extremely high flying pet insurer, trades at only 10x revenues despite exhibiting similar growth to Lemonade. The company’s ESG claims are full of hot air and in our view were only designed as part of a broader stock promotion scheme. You just cannot make a go of it selling pet and renters, there is not enough premium or profit to get your investor money back let alone make profits, pay dividends, grow, prosper, etc. Short Case on Opioid Player Collegium is Painfully Obvious. For example, its loss ratio in Q1 2020 was about 80% vs. about a 50% industry average. Lemonade has an indefensible valuation. ESG and social impact investing are all the rage. In its prospectus, it carved out the ability for insiders to sell up to 33% of their locked up holdings immediately, as long as the stock popped at least 33%. Lemonade Inc: Insurance company Lemonade Inc raised $319 million with an IPO that saw shares priced at $29. Yet chat room message boards are filled with traders who excitedly trade in extremely short duration options on the stock. This is because Lemonade is one of the most obvious farces in stock market history. In the past month, the stock has nearly doubled on gaining optimism the group will also be able to expand into new markets like pet and auto insurance. The technology side of the equation and service delivery models are fantastic and amazing. Jul. Unfortunately for Lemonade, we think the ESG stock promotion will unravel and leave investors holding the bag. Lemonade (LMND): A successful IPO of 2020 July 7, 2020 The usage of artificial intelligence (AI) has accelerated rapidly in the fintech industry. Insurance provider Lemonade Inc. is trading more than 350% above its July 1 initial public offering price, the best of any 2020 debut above $300 million, according to data compiled by Bloomberg. In our view, if the Lemonade experiment is successful, it will cast immense doubt on the ESG investing movement and give more credibility to opponents of ESG. While Lemonade does not appear to be particularly good at charity, it does appear to be extremely adept at setting up a stock dumping vehicle. I, like many other IJ readers, have expressed my doubts about Lemonade and, really, all other InsurTechs. Take a trip to Motley Fool, TikTok, YouTube, or Twitter and you will be inundated with stock promotion outfits touting Lemonade. After opening for trading at $11.50 a share on Oct. 19, Paya closed at $12.15 on its first day. Stop enabling egregious Wall Street scams and sell your Lemonade shares. A comment on the actual content of the article. This stock is a signature bubble stock (reminiscent of GPRO) and we expect that it will retrace all of its post-IPO meteoric rise and then some. All of this opens up significant risk of conflicts of interest. Its charity claims are a complete joke. Any ESG fund that wants to be taken seriously should not only exclude LMND from its investment universe, but should also rebuke Lemonade management for so blatantly abusing ESG principles for stock promotion purposes, Lemonade’s claims of being a disruptive technology company are also bogus – the company quietly reinsured its entire book of business at the time of its IPO – if Lemonade actually had any legitimate underwriting technology, it would not have outsourced all risk to reinsurance companies. If you run the math, Lemonade donates slightly over $1 per customer per year to charity! Donate your profits to a real charity effort instead of enriching greedy insiders. Part of the issue is that the lines that define a strong “ESG investment” remain unclear. Agreed that there is profitability challenges for all Insurance Risk Bearing entities in certain locations. At its heart ESG investing clearly has good intentions. These claims appear to be bogus based on Lemonade’s own actions ahead of its IPO. Lemonade sold 11 million shares at $29 a piece, bringing in just over $300 million and giving new investors the $444 million difference, based on … So while Lemonade is telling Millennials that it has no incentive to deny claims because of its “excess profits to charity” narrative, the reality is that reinsurers will cut Lemonade off – leaving the company essentially worthless – if Lemonade does not keep its underwriting tight and under control. We certainly would prefer a world where companies that bribe corrupt foreign governments, employ slave labor, require their employees to utilize Gatorade bottles for bathroom breaks, and dump toxic waste in the waters of Lake Michigan are held accountable. Lemonade claims it will donate “up to 40%” of its unclaimed premiums to charity. So ultimately, Lemonade investors are actually buying a low quality lead gen business masquerading as a disruptive fintech insurer. We believe this move was purely to amp up its appeal to ESG focused investors. companies in electric vehicles or in the clean tech arena. In our view, Lemonade is a despicable company that is taking advantage of people’s desire to do the right thing. Insurance provider Lemonade Inc. is trading more than 350% above its July 1 initial public offering price, the best of any 2020 debut above $300 million, according to data compiled by Bloomberg. Find out why Lemonade, Inc. is one of the 10 best stocks to buy now This impacts... My point is not that buying habits haven't or won't change, they absolutely will. So $1 of that premium goes to charity and they call this an ESG stock? Lemonade Files for IPO, Says It May Sell Life Insurance By Allison Bell | June 09, 2020 at 01:27 PM The insurtech startup says it's better at appealing to … He has zero insurance experience. The company has not even set up a website for its supposed philanthropic foundation (www.lemonade.org) but insiders are already trigger happy with the sell button. With only ~940k customers, Lemonade is a beyond subscale insurer. When you cut through the hype, Lemonade is basically a “lead gen” service, losing astronomical sums of money to find new customers and then selling that customer flow to reinsurers. Some estimate that over half of all capital allocated in the world will follow some form of ESG guideline within the next few years. Top holders include SoftBank Group Corp. and Sequoia Capital Operations LLC. This is why Lemonade is heavily restricted in how much it can give to charity – 75% of all money they collect immediately goes to reinsurers, and if they have high incentive to reject claims to keep their reinsurance contracts affordable. For the first quarter of 2020 revenue was $26 million and net losses stood at $37 million. In fact, in an ideal world, ESG investing wouldn’t be necessary because companies may actually be held accountable for ruining the world around them. For context, Lemonade collects about $200 a year in premium per customer. That is what makes Lemonade such an important story. The stock has been run up due to its tight float and high short interest. It is even more telling that one of the “Founding Fathers” of ESG investing – who the New York Times referred to as a “Buddhist Monk” – was arrested for bribing his child’s way into college. Lemonade Inc. is trading more than 350% above its July 1 initial public offering price, the best of any 2020 debut above $300 million, according to data compiled by Bloomberg. If that happened, we see no credible investment case for Lemonade and expect the stock will implode. First, it is clear that if Lemonade actually had some secret sauce proprietary technology, it would want to do better than just hold onto a small fee – it would want to hold onto economics. All of this also suggests that Lemonade’s ultimate acts of altruism and charity are likely to fall far short of their promotional hype. This condition has been more than met, and insiders have not been shy about dumping. And as a result, Lemonade is siphoning off funding that should go to companies that actually make a positive difference in society. The stock promoters of course do not want to admit this truth to investors. Lemonade has no secret sauce. After becoming one of the year’s hottest IPO’s, the stock took a breather for several months before resuming its upward trajectory. For morally conscientious investors sitting on massive Lemonade gains (gains that will entail large taxable gains that require stock liquidations in the coming weeks) here is our advice. Shares rocketed in their first day of trading and closed up 140%. They are just like everyone else in the P&C business, they are unable or unwilling (or both) to handle real risk. While Lemonade insiders have been quick to dump stock at prices less than half of where the stock currently rests, the company has not been so quick to set up a website for its supposed “Lemonade Foundation”. If you are reading this story and you have been following the ESG investing movement, we think you too will want to see the company fail spectacularly whether you are a fan or foe of ESG. And as the Millennial customer base comes to realize that Lemonade insiders are only in it for themselves and not for the “greater good” we think the stock will implode. We have also already established that the company donates many multiples less than the “up to 40%” of premiums to charity, which even further dents this alleged alignment claim. Of that, 24% are sold short, according to financial analytics firm S3 Partners. Despite the foundation being in existence for almost a whole year, Lemonade has not even bothered to provide a website for the foundation, let alone a mission statement or goals for the foundation (more on this in the next section). But come on guys – can you not at least populate a website before you start dumping your shares? Investors are preparing for the expiration, sending shares down as … There are many high flying companies in the market that are “ESG”-oriented with stratospheric valuations – e.g. Lemonade is run by a former executive from Powermat – a wireless charging pad company. Plenty of companies do charity and you don’t hear about it in the S-1. The difference is that those companies – at least in principle – are undertaking business operations that may theoretically improve the world. The company’s shares have soared on the promise of its digital platform in carving out a niche for renters and homeowners, according to Bloomberg Intelligence research. Lemonade, in an effort to fetch a high valuation, makes similar claims. It would be one thing if Lemonade was honest about being in the business of stock price maximization – but instead the company legally structured itself as a, Lemonade already loses a staggering amount of money (the company is only 5 years old yet cumulative losses are almost $300 million)…so if the company, Lemonade publicly claims it gives “up to 40%” of vaguely described “unpaid money” to charity – the reality is that it gives a meager ~$1 per customer per year to charities (works out to about ~3% of “unpaid money”)…this is despite a) claiming to be a quasi-for profit social impact company, b) sporting a $7 billion market cap, and c) having raised hundreds of millions from VCs and the public markets that are readily available and on hand. Earlier this month, online used car seller Vroom Inc. raised $467.5 million in its IPO, and its shares more than doubled in value on debut.. As part of the ESG narrative, Lemonade created a 501(c)(4) entity called the Lemonade Foundation and made an initial grant of shares to that foundation. That alone is not the reason the company will implode. Lemonade also intends to grant the underwriters 30-day options to purchase up to an additional 678,647 shares of Lemonade’s common stock. We agree and think this is a significant risk for the company. We should note that as short sellers we think ESG investing has a lot of merit. After this IPO failure, the company created a 501(c)(4) entity called “Lemonade Foundation” in February 2020 to amp up its appeal to ESG focused investors. But Lemonade is not profitable and losses ballooned from $21.6 million a year ago to $36.5 million. FL and CA are tough writes currently for Homeowners. Lemonade Inc. (NASDAQ: LMND) fell in preparation for the … The problem with this model is two-fold. Every imaginable stock promotion outfit has touted Lemonade in recent weeks. Lemonade ultimately lives and dies at the whim of conservative and old-line reinsurers, Company insiders have not been shy about dumping into the pump – the company has still not bothered to put up a website for its philanthropic “foundation” (a key piece of its “public benefit corporation” marketing gimmick) yet insiders found plenty of time to dump shares through a shady front-end loaded lockup deal negotiated into its original IPO, The final lockup has now expired and going into 2021, short term call option players are sitting on large taxable gains that will force liquidations in 1Q21 – we see a rush for the exits in early 2021 with Lemonade falling 90%+ in short order. Lemonade on the other hand a plain vanilla insurance company with no secret sauce that lives and dies based on reinsurance contracts. We think it is bringing disgrace upon the ESG movement. Lemonade presents itself as a “flat fee” capital-light insurer (there is no such thing) but in reality it is heavily reliant on reinsurers – the company quietly restructured its insurance activities immediately ahead of its IPO and will now live and die at the whim of reinsurance companies. It is a plain vanilla insurance company (primarily selling renters insurance) that reinsurers all of its risk. Please tell us what we can do to improve this article. My entire point is that no matter what the delivery system, insurance companies cannot handl... After Year’s Best IPO, Lemonade Insider Selling Lockup Expiration May Pressure Stock, World's Largest Insurers 2020: AM Best Ranks UnitedHealth, Allianz on Top, Insurance Leaders Condemn Violence by Trump Rioters Who Stormed Capitol, California Hospital Fined for Deadly Post-Holiday Virus Outbreak, Cloud Security Manager (Remote – Home Based Worker) -, Contact Center Service Operations Manager -, Lloyd's Perspective on the U.S. Property Insurance Environment, Expect Shift in Workers' Comp Profitability in 2021: Fitch, Frequency of Cyber Events Targeting Businesses Increasing: Travelers, 3 Ps to Consider When Managing the Risks of Assisted Living Facilities. That compares to 15.8 million shares available to trade as of Nov. 12, according to data compiled by Bloomberg. Traders are bracing for volatility as affiliates — including all of the company’s directors and executive officers — hold more than 38 million shares subject to the lockup. The NYSE has even claimed that Lemonade is “connecting profit with purpose”. Lemonade IPO: 13 Things for Investors to Know About LMND Stock The company is offering 11 million shares in its IPO By William White , InvestorPlace Writer Jul 2, 2020, 2:31 pm EST July 2, 2020 Alltstate also does substantially more philanthropic work than Lemonade yet does not dedicate all of its marketing materials to promoting this narrative. This is because we think Lemonade is blatantly abusing the ESG investing framework not because it wants to make the world a better place, but purely to enrich insiders and venture capitalists who are playing to an audience that increasingly wants to see companies behave responsibly and reflect their values. Lemonade tried to IPO in 2019 and failed. Until and unless they can manage to “bite off” some real risk, all these InsurTechs will just be a cute novelty that sells small risk, small premium policies. Lemonade discloses a risk of insurance regulators taking issue with some of its marketing claims. We have updated our privacy policy to be more clear and meet the new requirements of the GDPR. Again, no insurance experience. Companies such as Metromile have claimed that their specific telematics technology allows them to better underwrite car insurance risk. Perhaps most importantly, Lemonade is a disgrace to ESG/social impact investing and money managers who want ESG to be viewed with a non-critical lens should strongly consider speaking out against this company. What Will the Senior Living Market Look Like for Insurers Post-Pandemic? Plenty of companies do charity but they do not set themselves up as “public benefit corporations”. Investors have been snapping up tech IPOs in 2020, and Lemonade is a prime example of what they like. 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