Root Ends Trading Debut Flat After IPO Raises $724 Million

(Bloomberg) -- Auto insurance platform Root Inc. opened below it’s initial public offering price, then rose as much as 9.2% during the day before closing flat in its trading debut.

The Columbus, Ohio-based company and its shareholders raised $724 million in its IPO, pricing the shares above a marketed range at $27 each. The shares opened at $26 Wednesday and reached as high as $29.48 in the first minutes of trading. They closed the day at $27, giving the company a market value of $6.8 billion.

“We really proved it that you can build a tech company in Ohio,” Chief Executive Officer Alex Timm said in an interview. “This is what creates job and gets wealth into other areas of the country and not just concentrated in San Francisco and New York.”

Existing investor Hillhouse Capital took the largest position in the IPO, with stockholders Coatue Management and Ribbit Capital also investing in the IPO, Trimm said.

Root sold 24.2 million shares and investors sold 2.6 million shares of their own in the IPO after they were marketed for $22 to $25. In addition to the IPO proceeds, funds managed by Dragoneer Investment Group and Silver Lake agreed to buy $250 million in common shares in a private placement, according to a statement.

Online insurance platforms have fared well despite the economic downturn brought on by the coronavirus pandemic. Shares of the home insurance platform Lemonade Inc. have risen 69% from its July IPO price.

Root’s losses have increased in the past year, but so has its revenue. For the six months ended June 30, it lost $145 million on revenue of $245 million, compared with a net loss of $97 million on revenue of $104 million during the same period in 2019.

The offering was led by Goldman Sachs Group Inc., Morgan Stanley, Barclays Plc and Wells Fargo & Co. The shares are trading on the Nasdaq under the symbol ROOT.

Root board member Chris Olsen of Drive Capital said venture capital firms are investing in middle America more than ever before.

“The world has shifted,” Olsen said. “This trend was happening before the pandemic. The pandemic just accelerated it.”

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