US insurance startup Lemonade , backed by SoftBank, successfully raised $319m after launching an initial public offering (IPO) of 11 million shares in the US stock market.
The company’s shares were initially priced between $23 and $26 per share but ended up at $29 as a result of increased demand on Wednesday, as positive momentum in the IPO market continues with investors drawn to new issues, especially from tech businesses.
Based on the price of this IPO, Lemonade would have a market capitalization of around $1.6bn, which is $500m less than the $2.1bn valuation it achieved last June during a previous round of funding led by Japanese conglomerate SoftBank, the company’s largest shareholder and one of its most important backers. The firm is led by co-founder and chief executive Daniel Schreiber (pictured).
The successful listing of the New York-based online insurer comes only a couple of days after business analytics firm Dun & Bradstreet was able to place approximately $1.7bn in new shares from an upsized IPO that was initially priced at $19 per share but ended up locking a price of $22 per share as a result of higher-than-expected demand from investors.
IPOs have been gaining positive momentum recently, as tech stocks emerged as financial strongholds during the worst days of the pandemic. Lockdown measures contributed to this jump in valuations, as people and businesses relied on websites and cloud-based video apps to communicate, purchase goods, and entertain themselves.
Lemonade, now listed as LMND, has possibly picked the best moment to list its shares, as some of the momentum may have spilled over into its share sale, despite being a fairly small firm in a crowded insurance market filled with heavyweights.
Founded in 2015, Lemonade provides home and renters’ insurance policies for US clients along with other forms of insurance in Germany and Netherlands, relying on a web-based and mobile app to issue policies and pay for claims significantly faster than traditional insurers. US home and renters’ insurance are worth approximately $100bn and $4bn by data group IBIS.
The New York-based company claims that it only keeps a fixed fee from the insurance premiums it collects, which is how they manage to pay for claims so fast, while they distribute the remaining unclaimed underwriting profit to charities picked by policy holders during an annual event hosted by the firm.