Why Lemonade Stock Was Mashing the Market Today

What happened

Lemonade (LMND 8.17%) isn’t wasting any time concocting a new recipe for its business, and investors were rewarding the company for this. On Monday, following the announcement of an asset divestment, the next-generation insurance provider’s shares were rising by almost 9% in late afternoon trading.

So what

This morning, Lemonade announced in a tersely worded press release that it has sold off the enterprise business solutions (EBS) operation of recently acquired Metromile. The buyer is digital insurance platform operator EIS. Neither the price nor the terms of the deal were disclosed; Lemonade only said that it was effected entirely in cash, and that it occurred after Lemonade’s buyout of Metromile.

Investors clearly weren’t concerned about the price the EBS unit might have fetched. Instead, they were likely cheered that Lemonade is being active and effective in shaping its brand-new business unit to suit its needs.

Generally speaking, they’re happy about the Metromile acquisition, as many see the artificial intelligence (AI)-powered car insurance specialist as complementary to Lemonade’s suite of consumer-focused products. The Metromile deal resulted in only an 11% share price dip for Lemonade after it was announced — a relatively good showing for a company that suddenly reveals it’s about to spend a pot of money for a new asset. And Lemonade rose late last week when it announced the buyout had closed.

Now what

Now, however, it’s put-up-or-shut-up time for Lemonade with its shiny new toy. Yes, Metromile has clear synergistic properties with its parent, but Lemonade has yet to prove it can turn the asset into a reliable profit generator. Investor eyes will be on Lemonade as it continues to integrate the once-independent company into its business.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Lemonade, Inc. The Motley Fool has a disclosure policy.