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1/ Somebody DM'd me asking why I hate $LMND. I don't. I actually love the IDEA of what they're doing. It all sounds amazing. But I think the CEO is...less than transparent...about how real those ideas are. Here's an example...
2/ A key talking point is there's no conflict of interest because $LMND buys reinsurance and so has no incentive to deny your claims. Yet, in their own prospectus filed for their IPO, they themselves say otherwise. Here's a clip from p26.
3/ In their own words, $LMND is still "primarily liable to their policyholders as the direct insurers on all risks reinsured." Reinsurance doesn't remove the incentive at all. It just gives them the ability to say that it does. https://www.sec.gov/Archives/edgar/data/1691421/000104746920003943/a2242013z424b4.htm
4/ Another example. At 19:08 in this video: He says $LMND gets more traffic from social media than their competition, which = lower CAC. That's cherry picked data. First, their target audience skews younger so you would expect a higher %...
5/ But why don't we look at traffic from the search engines instead, because that's widely known to drive cheaper leads than social traffic. Geico has 27x more organic search traffic than $LMND.
6/ Further, Geico ranks for more valuable keywords. While Geico has 27x more traffic than $LMND, the value of that traffic is 56x. Both of these are from http://ahrefs.com .
7/ Now, I wouldn't expect $LMND to have more traffic than Geico. They're new. But when the CEO says they get more social traffic (relative not absolute btw) than their competition, and uses that to imply they'll have lower CAC, I'm like "oh sweetie no."
8/ That's not all. At 25:58 in that same $LMND video () he rattles off 6 examples of data they can collect about users in the app process. Three problems with this...
9/ First: Those items are some of the most basic data points any small business or even an individual can pull from their Google Analytics install...
10/ Second: I'll avoid technical desc here but your web browser sends that data. Many people disable that. Apple just moved to default opt-out for app tracking, and ad blockers / privacy extensions can prevent this basic data tracking entirely. This is becoming more common...
11/ Third: They can't possibly use that data as primary for underwriting because on an individual site visitor level it can't be relied on to be accurate. A roommate or family might use your computer. I can easily fake referrer data. Etc.
12/ So I don't hate $LMND. But I do think there's going to be a lot of pissed off bagholders who bought in at 73x sales because the story sounded so good. Caveat emptor.
Almost forgot...full disclosure I now have a short position on this stock, I'm not a financial advisor, and I can't even be trusted not to burn toast so do your own research.
