US-based automobile insurance startup Root has priced its previously announced initial public offering (IPO) to raise as much as USD 604.10 million.
Under the terms of the deal, the business is offering 24.20 million shares at between USD 22.00 and USD 25.00 apiece.
Root is hoping to fetch a valuation of around USD 6.25 million, the top end of the range after sources told Reuters earlier this year the company was hoping to be worth between USD 5.00 billion and USD 6.00 billion.
Goldman Sachs, Morgan Stanley, Barclays and Wells Fargo Securities have been hired as the lead underwriters for the IPO and have been granted the option to pick up an additional 3.62 million stocks at the offering price less the underwriting discount.
In addition, funds affiliated with Dragoneer Investment Group and Silver Lake Technology Management have each agreed to pick up USD 250.00 million-worth of shares in private placements that will close simultaneously with the offering.
Root, according to recent media reports, is among several other companies trying to tap the digital market after the coronavirus pandemic has pushed many customers to buy financial products – as well as almost everything from clothes to food – online.
The company offers personal insurance with a pricing model, using technology and data science to measure risk based on individual performance to prioritise fairness to each customer looking for automobile cover.
According to the prospectus, Root believes the USD 266.00 billion US auto insurance market is ripe for disruption as many systems and processes that currently determine how much drivers should pay is typically old and disconnected from the needs of each person.
In the three months to 30th September 2020, the group is expected to post net premiums earned of between USD 43.60 million and USD 45.30 million, compared to USD 75.80 million in the corresponding period of 2019.
Total revenue for this timeframe is slated to be in the range of USD 49.20 million and USD 50.90 million.
Root intends to use the proceeds raised in the transaction and the concurrent private placement to increase capitalisation and financial flexibility, create a public market for its class A common stock and for other general corporate and working capital purposes.
© Zephus Ltd