Metromile announced the PIPE (private investment in public equity) on Tuesday as part of a deal to go public at a projected $1.3 billion market capitalization. It has agreed to merge with NSU Acquisition Corp II, a special-purpose acquisition vehicle (SPAC) set up by asset manager Cohen & Co.
Buffett’s Berkshire Hathaway conglomerate counts Geico — one of the major US auto insurers that Metromile is seeking to disrupt — among its largest and longest-owned subsidiaries.
The famed investor personally bought Geico stock in the early 1950s. He shelled out $47 million to purchase a third of the company for Berkshire in 1976, and acquired the rest of the business for $2.3 billion in 1995.
Geico has added more than $50 billion to Berkshire’s intrinsic value since 1993, and generated more than $22 billion in insurance float to invest elsewhere, Buffett said in his 2018 letter to shareholders. The investor also praised the auto insurer as a “jewel” and “incredible company” at Berkshire’s shareholder meeting that year.
“Buffett had Geico,” Palihapitiya — the boss of Social Capital, Virgin Galactic’s chairman, and a SPAC specialist — tweeted on Tuesday. “I pick Metromile.”
“The option to pay for insurance by the mile is a game changer and why I’m incredibly excited about Metromile’s future!” Cuban said in a press release. The “Shark Tank” star and Dallas Mavericks owner was an early investor in Metromile.
The car-insurance upstart generated $53 million in revenue last year and stomached an operating loss of $57 million, an investor presentation shows. Meanwhile, Geico racked up $35.6 billion in revenue and $1.5 billion in pre-tax income in 2019.
Cuban, Palihapitiya, and Metromile have a long road ahead if they hope to topple Buffett’s Geico.
Source: Business Insider
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