What happened

The stock market was having a negative day on Friday, but insurance technology stock Lemonade (NYSE:LMND) was a big underperformer. As of 10:50 a.m. EST, Lemonade's shares were down by 7% after falling by as much as 10% earlier in the session. This is the second consecutive day of sharp declines for the insurance stock.

So what

There doesn't appear to be any new company-specific news driving the insurance stock lower. Rather, this appears to be a continuation of the pullback in the stock following several months of tremendous performance, a recent stock offering, and a negative short-seller report.

Glass of Lemonade.

Image source: Getty Images.

To briefly recap these one at a time:

  • Even after the recent slump, Lemonade's share price has nearly tripled since the beginning of November.
  • Lemonade recently sold 3.3 million new shares to raise capital to fund its growth, which typically gives investors concerns about dilution.
  • Citron Research on Thursday said on Twitter that Lemonade is "something special" and predicted that the stock will fall back to $100. It doubled down on its statement this morning, saying that "the FTC and SEC should look into Lemonade." This could certainly be contributing to today's move.

Now what

The move in Lemonade's stock price today (and yesterday) isn't based on anything too concerning for long-term investors. As I wrote a few days ago, it would be questionable if Lemonade didn't raise capital after such a rise in its stock price. And short-seller reports are bound to happen when a company has as much momentum as Lemonade's stock has had.

This price action does serve as a reminder that high-momentum stocks don't always go up, so it's important for investors who believe in Lemonade's long-term potential to be prepared to deal with large swings in the stock price in both directions.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.