Shares of insurer Oscar Health fall following $1.4B IPO
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The SoHo-based company’s share price on the New York Stock Exchange hovered around $31 Friday afternoon before market close, a decline of about 20% from the $39 pricing the company set for its initial public offering Tuesday evening. The stock opened below that price Wednesday, at $36.
The slow start contrasts with surging prices that many technology-focused companies received from initial public offerings in the past few months. Shares from online-delivery company DoorDash and home-rental site Airbnb both “popped” in their first days on the market, trading well above the initial price—prompting some to say the companies missed out on billions more by underpricing.
Citing strong investor interest, Oscar increased the pricing range of its shares Tuesday night from the $32 the company initially targeted.
The company was focused on raising enough to continue improving its products, CEO Mario Schlosser said in a CNBC interview before trading opened on Wednesday.
“That’s what we optimized for: to make sure we had the right amount of capital coming out of the process at a price we thought was fair for everybody,” he said, “right in the middle of the fairway.”
Oscar is among New York’s highest-profile health-focused startups, having raised more than $1 billion since its founding in 2012 by Schlosser and Joshua Kushner, the younger brother of Jared Kushner, former President Donald Trump’s son-in-law.
The company launched in response to the Affordable Care Act, selling plans on the New York start-run exchange. The company blanketed subway cars with ads promising “a new kind of health insurer,” promising an easy sign-up process and transparent billing through its app. The company also embraced telemedicine, offering 24/7 access to virtual care.
Oscar now operates in 18 states and reports having 530,000 members. The company has yet to sniff a profit, however, losing $261 million in 2019 and $407 million in 2020. Oscar officials warned prospective investors in its S-1 filings that it will still need to spend significantly on marketing and technology to continue attracting new customers.
The losses didn’t scare off the company’s private market investors. The list includes Joshua Kushner’s Thrive Capital, Google’s CapitalG venture firm and Fidelity Investments. The company led all New York health care startups in total venture funding raised in 2020, totaling $325 million in two rounds.
During the CNBC interview, Schlosser acknowledged that investors would need to have faith in Oscar over the long haul, citing the challenges of changing the massive market for health insurance.
“We’ll be responsible shareholders, that’s for sure, where people can trust us with their capital investment, but it is going to take awhile,” he said. “We told people at the beginning, our first investors coming in 2012 and 2013, that this will not be an easy story or overnight success. It is going to take a very, very long time.”