Shareholders demand ouster of Hippo chair Assaf Wand

Sep 19, 2023 | blog

More than two years have passed by since digital insurance coverage firm Hippo Holdings Inc. (NYSE: HIPO) was floated on the New York Stock Exchange at a valuation of $5 billion, and right this moment is has a market cap of simply $222 million, representing worth destruction of 96%. Despite the modifications that the corporate has made throughout this era, together with changing its CEO and shedding 10% of its staff, the momentum within the share worth has remained damaging, and to date this 12 months it has fallen 30%, at a time when the Nasdaq index rose 31% and the S&P 500 rose 15.9%. Hippo was based by Israelis within the US, and in 2021 opened an innovation heart in Israel. Among its traders are Israeli monetary establishments comparable to Clal Insurance, Psagot, Poalim Capital Markets, and the FINTLV enterprise capital fund.

Last week, two shareholders within the firm despatched an open letter to the Hippo board calling on the administrators to start a strategic overview of the corporate’s enterprise.

The shareholders involved are Bradley L. Radoff (who has acted in an analogous means in different firms previously) and Etude Capital. They say that, collectively, they maintain near 2.5% of Hippo, placing them among the many ten largest shareholders within the firm.

“Since becoming a publicly traded entity in early 2021, Hippo has generated abysmal financial results and operated in an unsustainable manner,” their letter states. “Hippo is now a micro-cap stock that trades at a roughly 50% discount to book value. We believe the Board must immediately embrace its fiduciary duty to preserve shareholder value while navigating a highly regulated industry,” it continues.

“We contend the only viable path forward is for the Board to immediately announce and run a strategic review process with the goal of preserving and maximizing value from the Company’s capital,” the shareholders say. They demand improved monetary disclosures: “The Company should cease giving meaningless non-GAAP guidance, like adjusted EBITDA, and focus on metrics that are critical to success as an insurer, such as book value and net income,” they write.

In their view, if the precise steps are taken, the share worth might rise by $15-20, that’s, by 60-125%. They search the appointment of Jay Nichols Jr. as chairman of the board. “We believe Mr. Nichols’s successful experience leading insurance company strategic actions and exits will inure to the benefit of the Company and its shareholders,” they state. The present chairman is co-founder Assaf Wand, who was eliminated as CEO final 12 months and changed by Richard McCathron.

Hippo offers in dwelling and residential contents insurance coverage within the US. In the second quarter of this 12 months it recorded income of $47.7 million, up from $28.7 million within the second quarter of 2022, however its working loss additionally grew, from $55.8 million to $87.7 million, and it posted a internet lack of $109 million.

In a letter to shareholders accompanying the second quarter financials, McCathron describes numerous challenges to which the corporate is uncovered, however states, “For a nimble tech company like Hippo, these challenges and the resulting market dislocation are an opportunity. Our technology allows us to make the necessary changes faster than traditional insurers.” He mentions excessive climate occasions that adversely affected the corporate’s quarterly outcomes, however says that such occasions previously led to alternatives.

Published by Globes, Israel enterprise information – – on September 19, 2023.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2023.

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