How did Lemonade turn $145 million in stock to over $155 million in cash?
The Israeli insurtech company completed the acquisition of car insurance provider Metromile on Thursday for 7.3 million LMND shares, which have fallen by 70% since the deal was agreed last November
Israeli-founded insurtech company Lemonade completed the acquisition of Metromile on Thursday for $145 million, $355 million less than it thought it would be paying for the car insurance provider when the deal was first announced last November. Lemonade shares were trading at around $70 when the transaction was announced last year, and it agreed to transfer 7.3 million of them to acquire Metromile. However, with Lemonade's stock plummeting by around 70% since, it ended up transferring $145 million worth of shares for a business with over $155 million in cash, over $110 million in premiums, and an insurance entity licensed in 49 states.
Making matters even worse for Metromile stock owners is the fact that the company went public at a $1.3 billion valuation via a SPAC merger less than two years ago. Lemonade currently has a market cap of around $1.2 billion.
While Lemonade is receiving Metromile’s $155 million in cash, it’s worth noting that the American company had $250 million in cash when the deal was first signed, meaning it has managed to lose around $100 million in less than a year.
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While Lemonade has been focused since its founding on using big data and AI in home and pet insurance, Metromile has been going down a parallel path for car insurance. Metromile’s car-mounted precision sensors took over 400 million road trips in recent years, covering billions of kilometers and sending real-time streams to the Metromile cloud. These were cross-referenced with actual claims data, yielding precise predictions for losses per mile driven.
