Lemonade Shares Fall 6% On Short-Seller Report

Lemonade announced on Thursday that it ended the year with over one million active customers. Its shares, however, fell 5.7% on the last trading day of 2020. Short seller Friendly Bear claimed that the AI-powered insurance company’s update reflected one of its weakest net ad quarters since inception.

Lemonade (LMND) hit the milestone of one million active customers in about 1,500 days since its initial launch. As per the company, that is some 15-45 years faster than industry leaders like State Farm, Allstate, GEICO, and USAA.

Shai Wininger, Lemonade’s co-founder, stated that with every new customer, their system grows smarter. Their underwriting gets better, and their prices become more accurate and fair. 

At Lemonade, one million customers translate into billions of data points that feed their AI at an ever-growing speed. Quantity generates quality, Winiger added.

Friendly Bear’s Response to Lemonade’s Update

Friendly Bear, a short seller, issued a report calling Lemonade an egregious stock promotion. It also said it is disguised as a social impact company.

It added that the company is making a complete farce of the ESG investment movement. This was the short seller’s response to the company’s update. 

Moreover, Friendly Bear stated that Lemonade publicly claims it gives up to 40% of vaguely described unpaid money to charity. But the reality is that it gives a meager ~$1 per customer per year to charities, it said. 

That works out to about ~3% of “unpaid money”, despite claiming to be a quasi-for profit social impact company.  Moreover, sporting a $7 billion market cap, and having raised hundreds of millions from VCs and the public markets. These are readily available and on hand.

Friendly Bear sees a rush for the exits in early 2021 with Lemonade falling 90%+ in short order. That is with the expiration of the final lockup period.