Oscar Health, the health insurance company co-founded by Joshua Kushner, raised more than $ 1 billion in an initial public offering that exceeded the price range traded by the company, in a sign of investor confidence despite political uncertainty about the future in the United States.
The New York-based company priced its shares at $ 39 each on Tuesday, according to a statement, raising about $ 1.4 billion. Oscar would have a market capitalization of $ 7.9 billion at that price, based on the total number of shares outstanding.
Oscar previously said it expected its stock price to be in the range of $ 32- $ 34, before increasing the range to $ 36- $ 38 on Tuesday. Coatue Management, Dragoneer Investment Group and Tiger Global Management – existing investors in the company – have indicated an interest in buying up to $ 375 million of shares in the offering.
The change demonstrated that investors are not bothered by potential headwinds for the company. President Joe Biden has promised to reform the United States’ health care system and the Supreme Court is considering a decision on the fate of the Affordable Care Act, known as the Obamacare, which could pose significant challenges to Oscar’s operating model.
Oscar was co-founded in 2012 by Mario Schlosser and Joshua Kushner, brother of Jared Kushner, son-in-law of Donald Trump. Kushner’s venture firm, Thrive Capital, owned a stake that would be worth $ 1.3 billion at the offer price and would give it 75.9 percent of the company’s voting power.
Oscar, which presents itself as the first health insurance company “built around a full stack technology platform”, has more than half a million paying members and offers insurance plans in 18 US states.
But the company has struggled to become profitable. In 2020, it recorded increasing losses of more than $ 400 million in revenue of about $ 460 million, a decline of almost $ 490 million in revenue in the previous year.
Oscar’s IPO came on the heels of several other premieres in the public market for “insurtech” groups last year, which fueled an already strong stock ticker race.
Clover Health, which uses data analysis to connect elderly people to Medicare Advantage plans, merged with a special-purpose acquisition company, or Spac, sponsored by former Facebook executive Chamath Palihapitiya in a $ 3.75 billion deal in October. Lemonade, which sells rent, home insurance and pet health insurance, went public last summer in what turned out to be one of the most successful stock market debuts of the year.
Oscar is highly sensitive to any changes in Obamacare, which lawmakers have struggled with since it was enacted into law in 2010. Almost all of the company’s revenue comes from plans subject to the regulations of the Affordable Care Act, according to its prospectus.
President Joe Biden’s health care program would leave Obamacare virtually intact, but it would make some adjustments and add a public option for all Americans. The Supreme Court, for its part, is expected to announce a decision on yet another revision of the Affordable Care Act in the coming months.
Goldman Sachs, Morgan Stanley and Allen & Co led the offer.