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Having raised substantial capital through the IPO, Root will be able to offset its $200 million debt in the near future.
Root Inc, the parent company of Root Insurance Company, has raised $724.4 million through an initial public offering (IPO) after selling 26,830,845 shares of its Class A common stock at a price of $27.00 per share. According to the prospectus, the underwriters have an option of a 30-days period to purchase additional 4,024,626 shares of Class A common stocks.
Shares of Root are to start trading on the Nasdaq Global Select Market on Wednesday, October 28, under the ticker ROOT. Notably, the company indicated the offering will continue until October 30 when it will close.
The lead bookrunners for the Root Inc IPO are Morgan Stanley, Goldman Sachs, Barclays, and Wells Fargo Securities. In addition, the company clarified that Trust Securities, UBS Investment Bank, Deutsche Bank Securities, Citigroup, Evercore ISI, and Credit Suisse will act as additional bookrunners.
On the part of co-managers of the Root Inc. initial public offering JMP Securities, Cantor Fitzgerald & Co., Huntington Capital Markets, and Siebert Williams Shank are going to hold the position.
Apart from the capital raised through the public, Root Inc. announced that Dragoneer Investment Group, LLC and Silver Lake have each invested $250 million through the class A common stocks.
Having raised substantial capital through the IPO, the insurance technology company will be in a position to offset its $200 million debt in the near future.
Root Market Performance before Its IPO
The company was founded back in 2015 has been offering car insurance through a smartphone administered driving test to its customers.
Notably, its system uses algorithms based on driving test results to calculate customers’ insurance premium rates. As a result, the company can offer cheaper services according to a person’s ability to drive safely and vice versa. This puts it on a vantage point to compete with other established insurance companies in the market.
According to its 2019 financial book, the company earned approximately $290.2 million in revenue. However, during the same year, the company recorded a net loss of $282.4 million. As for the first half of 2020, Root recorded a revenue of $245.4 million with a net loss of approximately $144.5 million.
Although this was a decline in revenue collection, the company has managed to reduce its net loss, which is a promising point of view. This is primarily because the insurance industry was adversely affected by the ongoing coronavirus crisis that has lowered demand for such services as people remain at home.