Can the Lemonade share price keep fizzing after its IPO?

Lemonade listed at $29 and quickly soared to a high of $96.51. Since then, the stock has drifted lower, but there doesn't seem to be any large scale selling that’s bringing others into the trade, says IGTV's Jeremy Naylor.

Since its initial public offering (IPO) last week, shares in Lemonade have soared, helping it triple the size of its market cap to $4.46 billion in a matter of days.

Lemonade listed at $29 and quickly soared to a high of $96.51. Since then, the stock has drifted lower, but there doesn't seem to be any large scale selling that’s bringing others into the trade, says IGTV's Jeremy Naylor.

Investors put scepticism aside for Lemonade

Lemonade has had tremendous success since listing on the NYSE, with the company boasting strong revenue growth, but remains loss-making and unable to produce a positive cash flow.

However, the company, which specialises in offering insurance to renters and homeowners, is not without its sceptics, with Hugh Tallents, senior partner at management consulting firm cg42, questioning the viability of Lemonade’s unproven business model in an interview with Marketwatch.

‘Ultimately, Lemonade is just another AI-backed, unprofitable fintech company with no real product or value proposition advantage,’ Tallents said last week.

Lemonade keeps fizzing for now

Investor excitement over the Lemonade IPO is understandable considering the lack of listings and IPOs that have been delayed or completely scrapped as a result of the challenging market conditions brought about by Covid-19.

A mixture of scepticism and rose-coloured thinking from investors is quite common for early-stage growth companies like Lemonade, with it likely to take time for the business to prove if its model is operationally sound and has the power to truly disrupt incumbent insurers. Over the near-term, investors can expect to see a lot of volatility from Lemonade in the months ahead.

Lemonade started in 2016, with the digital insurer streamlining the entire insurance process using artificial intelligence and data analytics, allowing it to provide an insurance policy in 90 seconds and handle claims in three minutes.

Significant shareholders in Lemonade post-IPO include Softbank (22%), Sequoia and Aleph (8.3% respectively), founders Daniel Schreiber (6.4%) and Shai Wininger (7.2%), General Catalyst (5.9%) and XL Innovate (4.2%).

S&P 500 carves out new higher low

The S&P 500 seems to be establishing a higher low at 3140, as it eases back from the peak of Tuesday’s session at 3190, according to Chris Beauchamp, chief market analyst at IG.

‘Further gains target this recent high, and then on towards 3240,’ Beauchamp added. ‘Alternatively, a reversal below 3120 could signal some more near-term weakness, potentially giving back more of the rally from the late-June lows at 3000.’

How to trade stocks with IG

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  2. Enter ‘Lemonade Inc’ in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

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