Categories: BusinessFinance

Lemonade Inc. soared to great heights on its IPO debut

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“Insurtech” startup Lemonade Inc. has impressed Wall Street with its stellar introduction with share prices skyrocketing over 100%.

Despite the coronavirus looming globally, traders this week are euphoric as this New York-based company just bagged the best initial public offering (IPO) debut of 2020.

This isn’t the first time this year that Wall Street encountered these market outliers amid the pandemic. Looking back into what happened, investors and traders saw positive rallies on companies filing for bankruptcy.

Not to mention the massive gains that Genius Brands International, Inc. has received since May. Beating Warner Music Group in its IPO debut as well as other IPOs, it looks like traders and investors are looking into Lemonade Inc.

What you should know about the IPO

To give other traders and future investors an idea on what the company is all about, a report MarketWatch gives us a bird’s eye view.

Started in 2016, Lemonade Inc. specializes in using artificial intelligence (AI) and big-data algorithms introducing an insurance business model that relies on bots instead of the usual human interaction.

Lemonade CEO Daniel Schreiber and COO Shai Wininger wrote in their founder’s letter that the company seeks to rewrite the rules on the insurance industry through a David versus Goliath dynamic.

Before the IPO listing, SoftBank Group Corp. has already poured in tons of money in this AI insurance company amounting to over US$300 million [AU$432 million] since April 2019.

What stands out in this insurance company aside from letting the AI do all the work, people’s unclaimed money is donated to charities according to the introduction video on their website.

Lemonade said that 70% of its customers are under the age of 35 and that about 90% of customers were not switching from another insurer as a result of how the company pitches itself. Aside from the fact that they use bots to interact with customers, the company also said in its SEC filing:

“Companies built on human brokers and claims agents have many strengths, no doubt, but appealing to millennials and Gen Zers is not chief among them.”

Are the lemons worth the investment?

In a quick interview on CNBC, the Lemonade CEO Daniel Schreiber told its viewers that they are not really focused on the price of shares right now since it just debuted.

He further explained to CNBC that the hype generated by the stock prices on the first minutes of trading was “just noise” and there was “no signal.”

However, he did assure the viewers that there is an opportunity to create the “21st-century incarnation of what a digital insurance company” in the long term. As per CNBC, the stock price for Lemonade Inc. closed 138.79% higher from its US$29 IPO price.

In addition, the “insurtech” startup also ranked 17 on CNBC Disruptor 50 for 2020. Wall Street shall observe if Lemonade Inc. could be a potential market outlier for the month of July.

Featured image courtesy of Lemonade Inc./Video Screenshot

Alec Padua

Alec a former mobile app developer turned independent singer-songwriter and busker based in the Philippines, who goes by the stage name "Alex Corner". He has released songs on Spotify and other music digital platforms. A self-taught trader and financial market enthusiast, he also started his own YouTube channel and blog called "The Trading Comedy" where he documents his trading journey in the Philippine Stock Market and beyond. He is also a casual gamer and streamer who enjoys FPS, RPG, and strategy games as well as conducting live charting sessions in the financial markets.

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