Oscar Health’s initial IPO price is so high, it makes me want to swear

Amidst all the hype that Lemonade (IPO), Root (IPO), Metromile (SPAC-led debut) and other insurtech players have generated in the last year, it’s been easy to forget about Oscar Health. But now that the company founded in 2012 is approaching the public markets, one of the early tech-themed insurance companies is catching up on the attention front.


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So this morning we’re digging into Oscar Health’s first IPO pricing interval, hoping to understand how the market is valuing its unprofitable health-insurance enterprise.

Recall that Oscar Health was valued at around $ 3.2 billion in March of 2018. That datapoint, via PitchBook, is dated. Oscar Health raised hundreds of millions since (per several venture-capital tracking databases, including Crunchbase) but we lack a final private valuation for the company.

Regardless, with Oscar Health now targeting a $ 32 to $ 34 per-share IPO range, we can get our hands dirty.

Let’s get some valuation numbers and then decide if Oscar Health feels cheap or expensive at that price.

Billion-dollar IPO

Oscar Health is looking to reap as much as $ 1.21 billion in its IPO, a huge sum. The company is selling 30,350,920 shares, with 4,650,000 additional shares reserved for its underwriters. Existing shareholders are selling another 649,080 shares.

This means that after the IPO, Oscar Health will have 197,037,445 Class A and B shares in circulation, or 201,687,445 after counting shares reserved for its underwriters.

Using the company’s $ 32 to $ 34 per-share range, we can calculate a valuation minimum of $ 6.31 billion for the company (lower share count, low-end of price range) and $ 6.86 billion (higher share count, high-end of price range). That’s the company’s simple IPO valuation.

Oscar Health may also sell up to $ 375 million of its shares at its IPO price to three different funds. The company advises that the “indication of interest is not a binding agreement or commitment to purchase,” so we can ignore it for now.

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How to price your idea to your first client and how to explain that pricing

Hey guys, I am running a small company that compares energy provider deals for the end customers. Also we have the option if you select a energy provider to generate a contract and sign it digitally which we send to the energy provider. (We can be certain that the energy provider has a client for 1 year) In my country we are first of our kind. We have 2 types of clients – energy providers which pay us and companies who use our service. In order our marketplace to work we need energy providers. So we found our first energy provider but he wants to know what do we charge. Our pricing model is simple we charge for every customer that becomes a client to the energy provider a small percentage fee of his monthly electricity bill. We are self bootstrapped and we are doing everything for fun because its interesting. We have never thought about money or getting to this point. One more thing in other countries such as England or Germany those types of services charge up to 30% of the monthly bill. We are planning to do business in the Balkans. ( 30% is not possible, margins are low).

As far as I know energy providers profit from a customer around 7 euro per month. We provide them a customer for a whole year.

So my question is how should I price my service, what should I take into consideration. I am thinking about 15% from the monthly bill single payment up to a max price.

lets say customer a has a monthly electricity bill of 40euro.We take a single payment for providing our service 15% of 40euro = 6 euro.

What happens if the user has 40+ euro monthly bill ?

Where should I say its our limit of price ?

Is the pricing model correct ?

How do I explain this to the client ?

Our costs are low, where do we draw the line and say we don't want more profit ?

What should you think when you price your idea ?
For me it was income – expense = small profit.
Should we take into consideration growth ?

Thank you for your help.

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