High-flying IPOs for Lemonade and Accolade may encourage other unicorns to go public

If you’d predicted in late March and early April that Q3 would kick off with a wide-open IPO market and receptive investors, I doubt anyone would have believed you. If you suggested that valuations would look pretty good as well, you might even have been laughed at.

And yet, here we are.


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Yesterday Lemonade and Accolade priced above their expected ranges, with Lemonade pricing above its raised range and Accolade selling more shares than expected. It’s hard to read the moves as anything other than the market demanding growth-oriented equities and not worrying too much about profitability.

Or more precisely: It’s the golden moment to go public for unprofitable unicorns seeking liquidity but worried about defending their private-market valuations. This sentiment is backed up by Agora’s solid pricing and explosive debut in recent days.

How long this public market moment will last is not clear. With the United States recording 50,000 new COVID-19 cases in a single day yesterday and the national economy beginning to slow once again, perhaps the window is short. Perhaps not — we were wrong before about the IPO market in 2020, so let’s not get too hasty to make more predictions — but it is clear that Q4 2019 wasn’t the only time when unicorns might have been able to attract the prices they wanted.

This morning let’s briefly go over the final pricing for Lemonade and Accolade and give them new revenue multiples ahead of their first days as trading entities. We need to start their public life knowing how they were valued ahead of their debut so that we can better understand the next set of companies that are bold enough to get off their backside and go public.

Roll out the welcome mat

We’ve abused every possible IPO metaphor in recent weeks. Open windows. Warm waters. But without cliché, we can state that IPOs are performing very well in recent weeks, with IPO Boutique reporting this morning that 17 of the last 27 IPOs have priced above the range that they first set.

Lemonade and Accolade are good examples of the matter. Here’s each company’s first proposed pricing terms and where they ended up, to make the point:

  • Lemonade initially targeted selling 11 million shares at $23 to $26 per share. That range was raised to $26 to $28 per share. The company finally priced at $29 per share, raising $319 million (not counting shares offered to its underwriters). The company was valued at $1.59 billion by its IPO pricing, still down from its final private valuation but much closer to being whole than we expected.
  • Accolade initially targeted a $19 to $21 per share IPO range, with the idea of selling 8.75 million shares. Instead, it priced at $22 per share and sold 10 million shares, giving it an IPO haul of $220 million. At that per-share price, Accolade is worth more than $1 billion, though we lack a final precise share count to value the company more accurately than saying that its nondiluted worth is around $1.07 billion before it began to trade.

Lemonade is being valued at more than 15x the value of its annualized Q1 revenue despite not sporting the gross margins you might expect investors to demand for it to merit that SaaS valuation. And Accolade only expects to grow by about 20% in Q2 2020 compared to its year-ago results while probably losing more money.

But who cares? The IPO market is standing there with open arms today (there’s always another IPO cliché lurking).

The read of this is impossibly simple: However open we thought that the IPO market was before, it is even more welcoming. For companies on the sidelines, like Palantir, Airbnb, DoorDash and Asana, you have to wonder what they are waiting for. Sure, you can raise more private capital like Palantir and DoorDash have, but so what; if you want to defend your valuation, isn’t this the market that was hoped for?

We’re closing the books on these offerings today as they will pass into the public realm and thus outside of our private-market focus. But what an unexpected and fascinating set of debuts. If you got IPO allocation in either debut, email in and tell us why. We’d love to hear about it.

More later today on $100 million ARR companies. But we had to get to this first.