Just yesterday, Lemonade (NYSE:LMND) revealed that the company completed its buyout of Metromile. Interestingly, LMND stock rose yesterday in the wake of this development, but today the shares are down.
Metromile seems to be a good fit for Lemonade’s business model. After all, both companies offer automobile insurance with a technology angle. It makes sense, then, that Metromile’s artificial intelligence, or AI, powered app should appeal to Lemonade and its stakeholders.
Lemonade co-CEO and cofounder Shai Wininger explained what makes Metromile unique:
“For ten years, Metromile’s intricate sensors monitored billions of miles of driving, while their AI cross-referenced this data with hundreds of thousands of claims, to accurately score each tap of the brake and turn of the wheel.”
Shai Wininger envisions “adding these models into the Lemonade Car platform.” This could be a game-changer for its market niche as Metromile is a pioneer, more or less, in applying big data and AI to car insurance.
LMND stock holders should also note, “The Metromile app and brand will continue in-market until all customers can be seamlessly transitioned to the Lemonade app and brand.”
What’s Happening With LMND Stock?
This all might sound like impactful, exciting news. And indeed, the Lemonade share price got a quick boost yesterday, nearly touching $20. Don’t assume the market’s response has been all positive, though. Today, LMND stock dropped 5% in early trading.
So, why would investors run hot and then cold on the Metromile acquisition? Perhaps they needed some time to digest the details of the buyout. Specifically, traders were probably considering what it would cost Lemonade to buy out Metromile.
The press release stated Lemonade would have to part with $145 million worth of stock shares. That’s definitely a pricey proposition.
However, Lemonade was quick to point out that it will receive “over $155 million in cash, over $110 million in car premiums, an insurance entity with 49 state licenses, and precision data from 500 million car trips” from the Metromile acquisition.
So, will this turn out to be the insurance-market deal of the decade? Only time will tell, but for today, financial traders are evidently in a cautious mood about Lemonade and Metromile.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.