(Bloomberg) -- Personal frustration with parking tickets led Metromile Inc. Chief Executive Officer Dan Preston to champion a feature to alert customers of his car-insurance company when they are parked in a street-sweeping spot, a surefire way to land a pricey fine.
To take his company public, Preston also selected an approach that would have been unusual a few years earlier: a merger with a blank-check company. Metromile will combine with a special purpose acquisition company, or SPAC, called Insu Acquisition Corp II, Metromile said Tuesday, confirming a report by Bloomberg earlier in the morning. When completed, the business will have an equity value of about $1.3 billion on a pro-forma basis, the companies said.
Insu II was set up by the financial services firm Cohen & Co. to target companies in the insurance sector. Insu raised $230 million in a September initial public offering, including the so-called greenshoe shares.
Metromile, founded in 2011, allows customers to pay for vehicle insurance on a per-mile basis, measured by a device plugged into the car. The company said it is getting a boost from changes in customer thinking that were accelerated by the Covid-19 pandemic. “We believe the era of fixed pricing is coming to an end,” said Preston.
When shelter-in-place orders began to keep drivers home instead of commuting to the office, many were dissatisfied with rebates offered by their existing insurers and switched providers, Preston said.
The company seeks to upend years-old insurance practices by allowing customers to file claims online rather than calling them in to agents, for example, and using apps in new ways, such as the parking alerts. It’s also licensing some of its technology to other insurers.
It plans to use the new cash raised to expand into more states—13 more next year. Metromile currently sells insurance in eight states, including California and New Jersey.
Based in San Francisco, Metromile’s backers include NEA, Index Ventures and First Round Capital. It is on track for annual revenue of $111 million from insurance premiums but isn’t yet profitable. The combined company plans to trade on the Nasdaq stock market under the symbol MLE.
Insu II is one of 196 SPACs that have raised an all-time high of more than $68 billion on U.S. exchanges this year, according to data compiled by Bloomberg. This year’s total for SPAC IPOs is approaching that of such listings in all previous years combined, the data show. SPACs raise money to hunt for merger candidates, allowing the target company to go public without the difficulty or risk of an IPO.
In July, tech-driven homeowner and rental insurance company Lemonade Inc. debuted on the New York Stock Exchange in a $319 million IPO.
