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Why Lemonade Stock Surged Today

By Joe Tenebruso – Jul 6, 2020 at 5:31PM

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The recent IPO is tearing out of the gates.

What happened 

Shares of Lemonade (LMND 0.91%) leapt 17% on Monday, furthering the AI-powered insurance company's torrid gains since its initial public offering (IPO) on July 2. 

So what

Lemonade priced its IPO shares at $29. Its stock ended its first day of trading on the public markets at $69.41. That 139% pop -- combined with the stock's additional gains today -- makes Lemonade one of the best-performing IPOs of the year so far. 

A person in a business suit is pointing to an upwardly sloping chart.

Lemonade's stock price is up sharply since its IPO. Image source: Getty Images.

Lemonade's strong early performance has also been a boon for Softbank Group (OTC: SFTB.Y). The Japanese investment conglomerate owns roughly 22% of Lemonade's shares. 

Now what

Lemonade provides renters and homeowners insurance in the U.S. The upstart is attempting to differentiate itself in a crowded industry by using artificial intelligence to quickly price policies and process claims. Its online model is designed to resonate better with millennials and other younger consumers. 

Judging by its stock's debut, many investors are apparently excited about Lemonade's growth prospects. Not everyone, however, is bullish on its shares.

Skeptics, such as management consulting firm cg42 senior partner Hugh Tallents, question the sustainability of Lemonade's as-yet-unproven business model. "Ultimately, Lemonade is just another AI-backed, unprofitable fintech company with no real product or value proposition advantage," Tallents told Marketwatch on Thursday. 

Such differing views among investors are common with early-stage growth companies. Ultimately, it will be Lemonade's operational performance that will determine its stock's long-term investment performance. But in the meantime, investors should expect more volatile price swings for this recent IPO stock.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Lemonade, Inc. Stock Quote
Lemonade, Inc.
$21.18 (0.91%) $0.19
SoftBank Corp. Stock Quote
SoftBank Corp.
$9.96 (-0.30%) $0.03

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