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Metromile: Promising Small-Cap Insurance Innovator

Aug. 01, 2021 3:44 PM ETLemonade, Inc. (LMND)16 Comments
Gary Alexander profile picture
Gary Alexander


  • Shares of Metromile have collapsed by nearly half since the company's SPAC debut earlier this year.
  • Metromile is a well-recognized car insurance vendor that has made a name for itself by offering per-mile-driven insurance plans.
  • Car insurance is a heavily fragmented industry that is ripe for new, tech-emboldened entrants.
  • The company's loss ratio has been improving over time with scale, which distinguishes it from other new insurance players like Lemonade.
  • I do much more than just articles at Daily Tech Download: Members get access to model portfolios, regular updates, a chat room, and more. Learn More »
Metromile headquarters campus facade in Silicon Valley
Michael Vi/iStock Editorial via Getty Images

It's been clear that insur-tech as a space is losing some of its appeals, at least when it comes to the public markets and recent IPOs. Lemonade (NYSE:LMND) is a good example here: after an initial spike that took Lemonade

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This article was written by

Gary Alexander profile picture
With combined experience of covering technology companies on Wall Street and working in Silicon Valley, and serving as an outside adviser to several seed-round startups, Gary Alexander has exposure to many of the themes shaping the industry today. He has been a regular contributor on Seeking Alpha since 2017. He has been quoted in many web publications and his articles are syndicated to company pages in popular trading apps like Robinhood.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in MILE over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (16)

CabalFollower profile picture
Betsy Cohen joins Metromile $MILE Board of Directors, investing millions in MILE MassMutual Barings owns 19.3M common in Novation Co $NOVC. $MILE and $NOVC are both massively shorted and could offer a bigger SHORT SQUEEZE then $GME.
Fortress, Wesley Edens CEO and EJF Capital Manny Friedman, CEO own 31.3M NOVC Common and the only Sr Debt to exit Ch 11 with $6.3M cash for no cram down. They were given post Ch 11 exit 31.3M NOVC common at less than ONE PENNY see Globenewswire link below, courtesy of NOVC Chairman. NOVC Chairman Barry Igdaloff restructured Dynex Capital NYSE $DX with Wesley Edens who at the time 2000-03 was Chairman of both Fortress and Capstead Mortgage $CMO. CMO owned DX. Igdaloff and his same DX cabal owns at least 40M NOVC common with his cabal mostly from Dynex Capital $DX. I with a small shareholder count own 30M NOVC shares totals 120M vs 116M shares outstanding in 2020 10K filed 3/4/21 Audited by www.boulaygroup.com which refuses to disclose same common equity investors own at the same time NOVC only Sr Debt to exit Ch 11 effectively allowing these investors to use Sr Debt as fodder to take 50M of their 90M NOVC commons shares at pennies or less. Who knows how many common they or their agents have bought at pennies per share?

The last 8 days over 2.465M shares traded on $NOVC of which 62% were shorted www.otcshortreport.com/company/NOVC on no news, no Q, Going Concern in 10K created by concealing the fact same investors www.Fortress.com and EJFcap.com own both the NOVC common and NOVC only Sr Debt, hidden by them behind CDOs they paid very little to own via CDO Service Rights; Fortress owns 2.3rd of NOVC only Sr Debt/31.3M common via Taberna CDOs I and II Fortress bought from #MILE Board Member Betsy Cohen RAIT Financial www.inquirer.com/... Who would short a penny stock?
They can copy their restructurings at Dynex Capital DX and Newcastle $NCT Fortress split into 3 tax exempt MREITs $NRZ, $SNR, $NEWM aka $GCI before changing Newcastle name to www.driveshack.com $DS.

I have reason to believe they will duplicate or cut and paste these restructuring blueprints at Novation Companies, Inc. $NOVC by separating NOVC ex MREIT Novastar Financial Inc that holds rights to rich, seasoned collateral assets to most of $3 Billion portfolio of RMBS, Non-QM collateral assets that can be leveraged 15:1 say 10:1 into 30 B portfolio x NIM of 500 Bpts say 400 Bpts that is $1.2B NIM less some SGA, Other Ex and you have annual dividend est at 3-6.00 (DX pays .13 ct MONTHLY dividend .39 cts per Qtr, NRZ in 2019 paid common 2.00 annual or 50 cts qtrly dividend). At 10% yield that is as much as 60 stock you can buy today for much less and this does not include like $DS another tax free company operating with 730M NOL www.healthcare-staffing.com. NOVC provides no transparency because by failing to be transparent and misleading Mr. Market they drive share price to pennies while they award the Board 18M RSU and give Note Holders hidden behind CDOs 31.3M common at less than ONE CENT. www.globenewswire.com/...
CDOs owned by Fortress/EJF Capital are would be worth almost $2B (31M shares x 60/share) and they still collect dividends and another lucrative management fee like NRZ per 10K at NRZ paid Fortress in 2019 alone $170M two part management fee. They still hold like DS HCS owned by NOVC www.healthcare-staffing.com
They also allow automatic syncing with Turo, so when you rent your car it doesn't count those miles against your policy. This was extremely convenient especially for cars I rented out full time on Turo, they should advertise this feature more imo. As of 2020 Turo had 450K cars listed worldwide, not sure about the US but seems like a good sized addressable market there
CabalFollower profile picture
3 KEYs to investing People/Leadership, Price market dynamics esp. growth & Product ability to offer unfair competitive advantage. The ability to SCALE + SCALE fast are keys to an attractive investment. Metromile $MILE has this entire equation.
Britton Bush profile picture
Might not be a bad strategy to nibble on MILE and LMND.

There is still a fair degree of speculation in both of these investments at this point, IMO. However, the potential for disruptiveness and large TAM in which these companies operate makes for a compelling upside.
pras1 profile picture
I think Mile selling off is like throwing baby with the bath water. The sell off in shit SPACs like NKLA NNDM etc have dragged good investment like MILE. Someone shorting the SPAC basket. But MILE is a good quality opportunity and it is not worth a nibble, it is worth digging in.
Risk0 profile picture
Gr8 note.
their innovative per mile is intriguing, but their rationale for covid revenue reduction couldn't be more wrong. Their whole basis for superior sales growth was that people want it when they drive less - covid is the best time since driving less, so no. of new purchases should have been thru the roof, more than compensating for revenue per customer decline?
Gtoz profile picture
@Gary Alexander What's the moat? If by-the-mile insurance really catches on, what's to keep more and more of traditional insurers to do likewise? Also, didn't some insurers issue credits to policyholders due to known lesser use stats since covid began? Back to the moat - is there some really differentiating software algorithms, some secret sauce, that would be hard to duplicate? And as far as bundling, I've been doing that for 47 years with my insurers. Including not only Auto & Home, but also Boat, Snowmobile and Umbrella liability policies or coverage.
M Cuturic profile picture
@Gtoz The moat is that no other insurer insures by the mile
Britton Bush profile picture
@Gtoz Agree with this good comment. Supposedly MILE has and / is collecting data via its drive tracking. This data could provide a moat to train ML algorithms. MILE supposedly has a unique and compelling MILE enterprise AI / ML software product, however it doesn’t appear to be resulting in much resultant revenue (at least not yet).
@Gtoz I just switched from GEICO to State Farm for a 45% discount and is on par with what MetroMile advertises. No secret sauce - State Farm is using a device that logs miles by baselining mileage and then communicating via an app on a smartphone for an additional discount, so I don't see an advantage either. Also, I drive and when I do so I see 1-2 idiots that I have to avoid being hit because they are distracted, and it happens frequently whether I drive 4 miles or 400 miles - so it is a lackluster stat to base good driving habits.
itchyandscratchy9 profile picture
Great recommendation and analysis! I’m familiar with the Metromile brand in socal but just discovered that it’s public thanks to this article. It could be a long term winner or potential acquisition target. I’m adding this company to my watchlist.
Interesting company.
Comparison with lemonade is favourable but would have liked goosehead comparison also.
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