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. It is also worth remembering that Allstate has a real management team with extensive experience in insurance. 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. Unfortunately for Lemonade, we think the ESG stock promotion will unravel and leave investors holding the bag. It would not take much for Alllstate or any other real insurance company to adopt Lemonade marketing tactics to help win over Millennials. Lemonade, in an effort to fetch a high valuation, makes similar claims. 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. As of March 31, 2020, Lemonade had $274.2 million in cash and $124.3 million in total liabilities. 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. Some estimate that over half of all capital allocated in the world will follow some form of ESG guideline within the next few years. We think it is bringing disgrace upon the ESG movement. 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. 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. Compare this to Lemonade which trades at 48x gross earned premiums. At its heart ESG investing clearly has good intentions. Some politicians have expressed distrust of ESG frameworks and certain influential Wall Street types have aggressively pushed back, espousing the benefits of ESG frameworks. Please tell us what you liked about it. The difference is that those companies – at least in principle – are undertaking business operations that may theoretically improve the world. There are many high flying companies in the market that are “ESG”-oriented with stratospheric valuations – e.g. Shares grew 139% in its first day of trading. 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. The biggest FinTech IPO of 2020 lost around 20% of its share price on Monday (Dec. 28). These claims appear to be bogus based on Lemonade’s own actions ahead of its IPO. Required fields are marked *. The key element of the Lemonade ESG stock promotion is that the company claims to donate “excess profits” to charity. 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. Investors have been snapping up tech IPOs in 2020, and Lemonade is a prime example of what they like. 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). Shares rocketed in their first day of trading and closed up 140%. 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”. 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. Plenty of companies do charity and you don’t hear about it in the S-1. This condition has been more than met, and insiders have not been shy about dumping. Insiders utilized an extremely shady lockup agreement so that they could start dumping shares immediately after the IPO. 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. 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. Investors are preparing for the expiration, sending shares down as … Lemonade discloses a risk of insurance regulators taking issue with some of its marketing claims. Insurance provider and technology company Lemonade ... Strong investor demand drove shares up 139% on its first day of trading back in July 2020. The stock has been run up due to its tight float and high short interest. 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. ... it priced its initial public offering at a range of $23 to $26. However, Lemonade is still in its early days and I expect its … 2, 2020, 01:24 PM. Please tell us what we can do to improve this article. Lemonade has an indefensible valuation. 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. The AI-enhanced upstart dealing in renters, homeowners, and pet health insurance made its public debut over the summer of 2020 with a … The stock promoters of course do not want to admit this truth to investors. The technology side of the equation and service delivery models are fantastic and amazing. What Will the Senior Living Market Look Like for Insurers Post-Pandemic? Even Trupanion, an extremely high flying pet insurer, trades at only 10x revenues despite exhibiting similar growth to Lemonade. 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. 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. In our view, Lemonade is a despicable company that is taking advantage of people’s desire to do the right thing. Thank you! So we are not writing this piece to take shots at ESG investing broadly. That is what makes Lemonade such an important story. Lemonade has no secret sauce. 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. So $1 of that premium goes to charity and they call this an ESG stock? A comment on the actual content of the article. We should note that as short sellers we think ESG investing has a lot of merit. 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. % of people found this article valuable. Lemonade (NYSE:LMND) embodies this movement. Agreed that there is profitability challenges for all Insurance Risk Bearing entities in certain locations. Lemonade (LMND): A successful IPO of 2020 July 7, 2020 The usage of artificial intelligence (AI) has accelerated rapidly in the fintech industry. 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. 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. So ultimately, Lemonade investors are actually buying a low quality lead gen business masquerading as a disruptive fintech insurer. 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. So Lemonade partners with well known reinsurers such as Lloyds. Short Case on Opioid Player Collegium is Painfully Obvious. After becoming one of the year's hottest IPO… 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”. Any other insurer could replicate its piddly charity contributions without denting their margins. That alone is not the reason the company will implode. Of that, 24% are sold short, according to financial analytics firm S3 Partners. 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. The company's revenue more than doubled in the first quarter of 2020 to $26.2 million. FL and CA are tough writes currently for Homeowners. For example, companies that lobby against the use of slave labor score well in many ESG rankings. He has zero insurance experience. It is a plain vanilla insurance company (primarily selling renters insurance) that reinsurers all of its risk. 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 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. Shares of Lemonade currently trade at $125.11, making the company one of the best performing IPOs of the year. 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. 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. 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 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. 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. 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 … For context, Lemonade collects about $200 a year in premium per customer. 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