companies in electric vehicles or in the clean tech arena. 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). If that happened, we see no credible investment case for Lemonade and expect the stock will implode. Investors are preparing for the expiration, sending shares down as … However, Lemonade is still in its early days and I expect its … But come on guys – can you not at least populate a website before you start dumping your shares? Thank you! We should note that as short sellers we think ESG investing has a lot of merit. 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). That, in conjunction with a much larger lockup release on 12/29 lead us to conclude that the stock will implode in short order. 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. The difference is that those companies – at least in principle – are undertaking business operations that may theoretically improve the world. Shares grew 139% in its first day of trading. Lemonade is an egregious stock promotion disguised as a social impact company – the company is making a complete farce of the ESG investment movement. Insurance company Lemonade's post-IPO lockup of insider stock selling is set to expire Tuesday. Free cash flow during the twelve months ended March 31, 2020, was negative ($79.9 million). After opening for trading at $11.50 a share on Oct. 19, Paya closed at $12.15 on its first day. Nothing prevents Lemonade from using this foundation for political lobbying efforts. Stop enabling egregious Wall Street scams and sell your Lemonade shares. There is no big addressable market story. Agreed that there is profitability challenges for all Insurance Risk Bearing entities in certain locations. This is because Lemonade is one of the most obvious farces in stock market history. 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. The company’s charity activities are hot air. All of this opens up significant risk of conflicts of interest. Lemonade tried to IPO in 2019 and failed. Short Case on Opioid Player Collegium is Painfully Obvious. That number is imprecise, but directionally useful. Strong investor demand drove shares up 139% on its first day of trading back in July 2020. 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. Required fields are marked *. That is what makes Lemonade such an important story. Its charity claims are a complete joke. The problem with this model is two-fold. 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. It is a plain vanilla insurance company (primarily selling renters insurance) that reinsurers all of its risk. Some estimate that over half of all capital allocated in the world will follow some form of ESG guideline within the next few years. 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. 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. Plenty of companies do charity and you don’t hear about it in the S-1. 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 … 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. 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. Long-time insurance unicorn Lemonade has filed for its IPO. Any other insurer could replicate its piddly charity contributions without denting their margins. 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. 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 … 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. They are just like everyone else in the P&C business, they are unable or unwilling (or both) to handle real risk. 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. Please tell us what you liked about it. 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. For example, companies that lobby against the use of slave labor score well in many ESG rankings. Lemonade also intends to grant the underwriters 30-day options to purchase up to an additional 678,647 shares of Lemonade’s common stock. The stock rose modestly by 2020 IPO standards since then. 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. 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. 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. Even Trupanion, an extremely high flying pet insurer, trades at only 10x revenues despite exhibiting similar growth to Lemonade. For context, Lemonade collects about $200 a year in premium per customer. 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. The stock promoters of course do not want to admit this truth to investors. So $1 of that premium goes to charity and they call this an ESG stock? Insiders utilized an extremely shady lockup agreement so that they could start dumping shares immediately after the IPO. But Lemonade is not profitable and losses ballooned from $21.6 million a year ago to $36.5 million. The technology side of the equation and service delivery models are fantastic and amazing. Lemonade discloses a risk of insurance regulators taking issue with some of its marketing claims. Some politicians have expressed distrust of ESG frameworks and certain influential Wall Street types have aggressively pushed back, espousing the benefits of ESG frameworks. The NYSE has even claimed that Lemonade is “connecting profit with purpose”. Of that, 24% are sold short, according to financial analytics firm S3 Partners. There are many high flying companies in the market that are “ESG”-oriented with stratospheric valuations – e.g. 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. 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. 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. Part of the issue is that the lines that define a strong “ESG investment” remain unclear. Lemonade (LMND): A successful IPO of 2020 July 7, 2020 The usage of artificial intelligence (AI) has accelerated rapidly in the fintech industry. Companies such as Metromile have claimed that their specific telematics technology allows them to better underwrite car insurance risk. Lemonade claims it will donate “up to 40%” of its unclaimed premiums to charity. If you run the math, Lemonade donates slightly over $1 per customer per year to charity! Every imaginable stock promotion outfit has touted Lemonade in recent weeks. 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). Yet on the day of its IPO, Lemonade restructured its entire business and essentially shifted all of its risk to reinsurance. According to its S-1 filing with the U.S. Securities and Exchange Commission, it … Shares rocketed in their first day of trading and closed up 140%. 2, 2020, 01:24 PM. Find out why Lemonade, Inc. is one of the 10 best stocks to buy now Its other co-founder was involved with Fiverr – a marketplace for freelance work. 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. 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. 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. FL and CA are tough writes currently for Homeowners. 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. Lemonade Inc: Insurance company Lemonade Inc raised $319 million with an IPO that saw shares priced at $29. 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. The stock has been run up due to its tight float and high short interest. The company is valued at $2.1 billion and has raised a cumulative $480 million all the way through its Series D round. Lemonade, in an effort to fetch a high valuation, makes similar claims. Lemonade Inc. (NASDAQ: LMND) fell in preparation for the … Get the insurance industry's trusted newsletter. 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”. The key element of the Lemonade ESG stock promotion is that the company claims to donate “excess profits” to charity. Presently, the foundation consists of employees that work for Lemonade the public trading vehicle. 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. This impacts... My point is not that buying habits haven't or won't change, they absolutely will. Lemonade (NYSE:LMND) embodies this movement. Compare this to Lemonade which trades at 48x gross earned premiums. Again, no insurance experience. 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. 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 … 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”. % of people found this article valuable. The AI-enhanced upstart dealing in renters, homeowners, and pet health insurance made its public debut over the summer of 2020 with a … Shares of Lemonade currently trade at $125.11, making the company one of the best performing IPOs of the year. Take a trip to Motley Fool, TikTok, YouTube, or Twitter and you will be inundated with stock promotion outfits touting Lemonade. Lemonade is targeting a $100 million IPO according to its filings. 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. 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. By continuing to use our site, you accept our revised Privacy Policy. We have updated our privacy policy to be more clear and meet the new requirements of the GDPR. These claims appear to be bogus based on Lemonade’s own actions ahead of its IPO. 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. A comment on the actual content of the article. In our view, Lemonade is a despicable company that is taking advantage of people’s desire to do the right thing. Lemonade is run by a former executive from Powermat – a wireless charging pad company. ESG and social impact investing are all the rage. Lemonade on the other hand a plain vanilla insurance company with no secret sauce that lives and dies based on reinsurance contracts. Yet for the “low low cost” of $1 per customer per year, Lemonade got itself a nice multi-billion dollar ESG premium valuation. What Will the Senior Living Market Look Like for Insurers Post-Pandemic? With the float now opening, we see this game reversing soon. All of this also suggests that Lemonade’s ultimate acts of altruism and charity are likely to fall far short of their promotional hype. Plenty of companies do charity but they do not set themselves up as “public benefit corporations”. Unfortunately for Lemonade, we think the ESG stock promotion will unravel and leave investors holding the bag. So ultimately, Lemonade investors are actually buying a low quality lead gen business masquerading as a disruptive fintech insurer. For the first quarter of 2020 revenue was $26 million and net losses stood at $37 million. We think it is bringing disgrace upon the ESG movement. Investors have been snapping up tech IPOs in 2020, and Lemonade is a prime example of what they like. 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”. 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). Lemonade has an indefensible valuation. And as a result, Lemonade is siphoning off funding that should go to companies that actually make a positive difference in society. The biggest FinTech IPO of 2020 lost around 20% of its share price on Monday (Dec. 28). That alone is not the reason the company will implode. Insurance provider and technology company Lemonade ... Strong investor demand drove shares up 139% on its first day of trading back in July 2020. The company's revenue more than doubled in the first quarter of 2020 to $26.2 million. Lemonade has no secret sauce. 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. After becoming one of the year’s hottest IPO’s, the stock took a breather for several months before resuming its upward trajectory. 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. It is also worth remembering that Allstate has a real management team with extensive experience in insurance. Many insurance companies are using AI to compete with their competitors. He has zero insurance experience. 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. 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. Lemonade's 140% IPO debut was one of the best of 2020, but it raises questions Jul. 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. It would not take much for Alllstate or any other real insurance company to adopt Lemonade marketing tactics to help win over Millennials. The reality is that the company donates next to nothing to charity (the 40% figure is closer to ~3% of unclaimed premiums) and given the company’s willingness to run with staggering losses and its high cash on hand, it does not appear that there is anything that would practically limit Lemonade from donating more money to charity. As of March 31, 2020, Lemonade had $274.2 million in cash and $124.3 million in total liabilities. Alltstate also does substantially more philanthropic work than Lemonade yet does not dedicate all of its marketing materials to promoting this narrative. Yet chat room message boards are filled with traders who excitedly trade in extremely short duration options on the stock. 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. Your email address will not be published. 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. But not Lemonade. 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. 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. Donate your profits to a real charity effort instead of enriching greedy insiders. 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. 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. 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. I, like many other IJ readers, have expressed my doubts about Lemonade and, really, all other InsurTechs. This condition has been more than met, and insiders have not been shy about dumping. 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. 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. It is customary for insiders to wait 6 months to sell shares after an IPO. So we are not writing this piece to take shots at ESG investing broadly. ... it priced its initial public offering at a range of $23 to $26. 03, 2020 3:56 AM ET Lemonade, Inc. (LMND) By: David Jackson , SA News Editor 84 Comments 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.. Unfortunately, in some cases, financial charlatans and hucksters have hijacked the movement for self-enrichment. At its heart ESG investing clearly has good intentions. Please tell us what we can do to improve this article. But roughly 44 million additional shares — mostly held by insiders — will be eligible for sale on Tuesday, according to the IPO prospectus. We agree and think this is a significant risk for the company. 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. 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. 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. We believe this move was purely to amp up its appeal to ESG focused investors. But 2020 is alive with … 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. With only ~940k customers, Lemonade is a beyond subscale insurer. 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%. 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. 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”. 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. Top holders include SoftBank Group Corp. and Sequoia Capital Operations LLC. 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 The best-performing listing of 2020 is poised to enter the new year with extra volatility after insider selling restrictions expire this week. 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. 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. Jul. For example, its loss ratio in Q1 2020 was about 80% vs. about a 50% industry average. 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.”. 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. We believe this move was purely to amp up its appeal to ESG focused investors. After becoming one of the year's hottest 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. So Lemonade partners with well known reinsurers such as Lloyds. Living market Look like for Insurers Post-Pandemic profitable and losses ballooned from $ 21.6 million a year ago to 26.2. D round of interest t hear about it in the world does substantially more philanthropic than! 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