Oscar Health, the health insurance company co-founded by Joshua Kushner, slipped in its Wall Street debut after raising $1.4bn in its initial public offering.
The New York-based company opened at $36 a share on Wednesday, after pricing at $39 the previous evening. Its IPO pricing gave the group a market capitalisation of $7.9bn.
Oscar’s float was priced above the range it earlier projected of $36 to $38 in a sign of robust investor demand. However, the early fall in New York trading contrasts with big pops in other recent debuts.
“The most important part of today is that we have more capital on the balance sheets and that our employees at the company are proud that we got to this point,” said Mario Schlosser, the company’s chief executive. “Where the first day opens I don’t think is all that important.”
Coatue Management, Dragoneer Investment Group and Tiger Global Management — existing investors in the company — had indicated interest in purchasing up to $375m of shares in the offering.
The strong IPO pricing had demonstrated that investors were relatively unfazed by potential headwinds for the company. President Joe Biden has vowed to reform the US healthcare system and the Supreme Court is considering a decision on the fate of the Affordable Care Act, known as Obamacare, both of which could pose significant challenges to Oscar’s operating model.
Oscar was co-founded in 2012 by Schlosser and Joshua Kushner, the brother of Jared Kushner, Donald Trump’s son-in-law. Kushner’s venture firm, Thrive Capital, owned a stake that would be worth $1.3bn at the offering price and give it 75.9 per cent of the company’s voting power.
Oscar, which bills itself as the first health insurance company “built around a full stack technology platform”, has more than half a million paying members and offers its insurance plans in 18 US states.
But the company has struggled to become profitable. In 2020, it recorded widening losses of more than $400m on $2.3bn of direct policy premiums, a stand-in for revenue. Most of those premiums are ceded to reinsurance firms.
Oscar’s IPO came on the heels of several other public market debuts for “insurtech” groups in the past year, which fuelled an already strong run of stock market listings.
Clover Health, which uses data analytics to connect senior citizens to Medicare Advantage plans, merged with a special purpose acquisition company, or Spac, sponsored by former Facebook executive Chamath Palihapitiya in a $3.75bn deal in October. Lemonade, which sells rental, homeowners and pet health insurance, went public last summer in what turned out to be one of the year’s most successful stock market debuts.
Oscar is highly sensitive to any changes to Obamacare, which lawmakers have wrestled over since it was written into law in 2010. Almost all of the company’s revenue comes from plans subject to Affordable Care Act regulations, according to its prospectus.
Biden’s healthcare programme would leave Obamacare largely intact, but would make some adjustments and add a public option for all Americans. The Supreme Court, meanwhile, is expected to announce a decision on yet another review of the Affordable Care Act in the coming months.
Goldman Sachs, Morgan Stanley and Allen & Co led Oscar’s offering.