(Reuters) – Shares of Root Inc fell nearly 4% in their market debut on Wednesday, marking a weak open for the automobile insurance startup after it raised about $724 million in its initial public offering.
The stock opened at $26, compared to its IPO price of $27 per share.
Root had earlier targeted a range of $22-$25 per share. At the debut price, the company was valued around $6.5 billion.
Root, which provides insurance to customers through mobile apps, is among several firms vying for a share in the online financial products market that has seen a boost due to the COVID-19 pandemic.
“There will be some short-term noise from COVID – with less driving – but I think that will normalize,” Alexander Timm, chief executive officer and co-founder of Root, said in an interview with Reuters.
In the first six months of 2020, the company’s revenue was $245.4 million and its net loss was $144.5 million.
Online insurance broker GoHealth and policy comparison website SelectQuote Inc had both marked strong market debuts earlier in the year.
Technology stocks have also seen increased interest in recent times, given the sector’s resilience through the pandemic. For instance, the technology-heavy Nasdaq index has gained about 26% this year, outperforming its Wall Street peers on strength in major technology stocks.
U.S. automobile sales are also expected to pick up in October after a coronavirus-induced lull, thanks to pent-up demand and tighter inventories, two industry consultants said.
“You’re going to see pretty large market-share shifts (in the automotive insurance industry), that are driven by competitors that have modern technology,” Timm added.
Goldman Sachs, Morgan Stanley, Barclays and Wells Fargo Securities are the lead underwriters for Root’s offering.
(Reporting by Ambar Warrick in Bengaluru; Editing by Ramakrishnan M. and Maju Samuel)
