Over the next few months, I plan to take an occasional step back from specific fintech companies and deals to talk a little bit more generally about the overall category, how my own thinking has (and continues to) evolve, and use some examples from my own life to analyze some of the finance/fintech problems that capture my interest. These will be broken into a few different series and getting them started has taken me a little bit longer than I’ve liked. As I work through them, and battle the distractions of summer, the result will likely be more infrequent updates to “New Money” (as I’ve dubbed this blog/newsletter). For now, bi-monthly (either interpretation) feels like a good cadence vs. my original goal of once per week.
And while those aforementioned series are being written behind the scenes, Lemonade’s debut made big enough waves that I felt it important to do a quick “follow-on” to my pre-IPO analysis.
The TL;DR
is that the public market reaction was absurdly favorable and by the end of it’s first week on the market, LMND was trading at 140% of its $29 IPO price. At time of publishing today (two weeks later) they are trading at $74.
From Lemonade’s perspective, the outcome is a bit complicated. IPOs are a messy topic. Notable investors like Bill Gurley have called for their removal altogether and that topic alone is worthy of its own fintech musing (perhaps another day). At a minimum, the $29/share price at IPO represented a down round (a valuation lower than their previous, privately raised, Series D round) despite market appetite for the shares well above that level (at $74/share, Lemonade is now valued at ~$4B). Lemonade will obviously be happy to see that investors are loving their growth story, but they will also be feeling the multi-billion dollar sting of leaving so much cash on the table.
And the ripple effects (no, not THAT ripple)
And as predicted, this news sparked some momentum for other fintech firms that may be eyeing their own public debut in the near future. Lemonade’s stratospheric valuation of ~50x revenue (Tesla, eat your heart out) is providing confidence to private investors that a strong growth story and a plausible path to economic viability may be enough to garner respect in the public markets right now.
Robinhood (whose relationship with Tesla is even harder for me to grasp) appears to have taken advantage of Lemonade’s good fortune by topping up their Series F round with a fresh $320M in capital. This comes from some very smart investors despite the discount brokerage firm’s long-standing challenge to become profitable and recent controversy following the tragic suicide of a 20-year-old trader last month. So regardless of your views on the problems they are facing, they at least seem aware that their house needs some repairs before they can show it off.
And in the same week, rumors circulated that Coinbase is eyeing a public offering in the next 6-12 months. This is one I’m very interested in. Coinbase is a company that is rife with contradictions. And despite all of them, they are rumored to have generated over $1 billion in revenue in 2017, during the peak of cryptomania. Whether or not they’ve been able to sustain anything like that since remains unknown, but anything near that number would represent a company much larger than (and in my view, comparable to) Robinhood.
I will most certainly do another S-1 analysis for either firm if and when they are available.
Which brings me to one more high profile fintech S-1 that I have intentionally chosen not to discuss here: Quicken Loans. I’ve obviously been aware of it. But given my role at Better and the insight that comes with it, I believe it would be imprudent to share any of my own analysis in this forum.
However, if you’ve done some analysis of your own or read one that is worth sharing, please pass it along.