Lemonade’s Stock Falls 9% After Metromile Acquisition

Trending News 🌧️

Lemonade stock ($NYSE:LMND) fell as much as 9.0% in Friday trading, one day after the completion of its acquisition of car insurer Metromile. Under the terms of the deal, Lemonade issued 7.3 million shares of common stock to Metromile, in exchange for a business with more than $155 million in cash, more than $110 million in premiums, and an insurance firm licensed in 49 states. The acquisition also gives Lemonade access to Metromile’s data on driver behavior and claims. The deal increases Lemonade’s number of shares outstanding by about 12%, using its 61.78 million shares of common stock outstanding as of May 10, 2022 as a base. Some investors may be concerned that the dilution of Lemonade’s stock will have a negative impact on the company’s earnings per share in the long term. It remains to be seen how the acquisition will affect Lemonade’s business and financial performance in the future.

Market Reaction

On Friday, shares of Lemonade Inc. fell 9% to $18.8 after the company announced it would be acquiring Metromile, a car insurance provider. Some investors are concerned that the acquisition will be dilutive to Lemonade’s earnings, and the stock price reflects this.

However, others believe that the acquisition will help Lemonade expand its customer base and grow its business. Time will tell whether the acquisition is a good or bad move for Lemonade, but for now, the stock price is reflecting some investor uncertainty.

VI Analysis

As a company’s fundamentals reflect its long term potential, the below analysis on LEMONADE are made simple by VI app. The VI Star Chart shows that LEMONADE is strong in growth, medium in asset and weak in profitability, dividend. LEMONADE has a low health score of 2/10 considering its cashflows and debt, is less likely to pay off debt and fund future operations. LEMONADE is classified as ‘cheetah’, a type of company that achieved high revenue or earnings growth but is considered less stable due to lower profitability. At the right price, it is suitable for those who wants to invest for high capital gains. High growth companies are deemed more volatile as they attempt to grow faster.

Summary

Lemonade’s stock price fell 9% after the company announced it was acquiring Metromile, a car insurance startup. investors were worried that the acquisition would be dilutive to Lemonade’s earnings per share.