$LMND has recently become one of my largest positions.It comes with a lot of risks as a young company trying to disrupt the insurance industry.Today, short seller Citron Research published an interesting 7min "critique" of the company

I'm not a professional investor but I found the video interesting.

As a shareholder, I'm happy to hear short cases, and review facts that I might have missed.

But it was quite hard to pinpoint the exact actions taken by $LMND which could constitute anything really close to fraud and deceit painted by Citron.

Overvalued with a co-founder who complained about negative traders? Yes.

Outright fraudulent? Very tough to tell.

Normally, I don't care about this kind of stuff. But given $LMNDS recent stock run and their earnings coming in February, it was worth me doing some DD on this to brush up on the company.

Compare this 7min video to this short report from Hindenburg Research on $NKLAHTTPS://t.co/8EhWmF9jrtAdditionally,

Hindenburg actually disclosed that they had a short position on the stock.

It is unclear if Citron is actually short $LMND to start, which would be hilarious if they didn't. There is no indication of a position on their website.

While I agree with Andrew that the current valuation may cause many to raise an eyebrow. But lofty, hard to make sense of valuations do not automatically mean fraud and "lying" worthy of an investigation from the SEC or FTC is taking place.

Andrew's main (and really only allegation) comes to not living up to to sufficient social impact standards that the company claims, "This particular company is not doing it at all." and should be investigated as a result.

$LMND is a certified b-corporation

"Our directors have a fiduciary duty to consider not only our stockholders’ interests, but also our specific public benefit and the interests of other stakeholders affected by our actions."

B-Corps certifications are "administered by Standards Analysts at the non-profit B Lab. Standards Analysts are located at B Lab's Pennsylvania, New York, and Amsterdam offices. The standards for B Corp Certification are overseen by B Lab's independent Standards Advisory Council"

Certifications seem to last 3 years before needing to be recertified and $LMND was first certified in 2016, meaning they have most likely been re-certified.And have a score of 83.2 compared to the all B-Corp of 50.9. An objectively strong result, in a cohort of ESG focused co's

While it may not live up to everyones standards, the B-Corp certification is one of, if not one of the leading bodies in this area.

If there are more bodies out there measuring ESG, I would love to hear it.

While in good standing with this certification, I find it hard to imagine how the SEC and FTC could look into $LMND on these allegations.

$LMND's largest claim around their giveback program is that "we give back that unclaimed money (up to 40!) to the nonprofit you chose)

Why do this?

They believe that if some % of unclaimed premiums go to charity, you (as a policy holder) are less likely to make fraudulent claims.

This giveback program has nothing to do with insiders selling shares and everything to do with unclaimed premium.

This is where I was hoping Citron would be able to show some facts, if not at the very least, figures...which wasn't really the case.

It's not obvious as to how to calculate this viewing their quarterly filings. Common share contribution to the Lemonade Foundation for 9 months ending Sept 2020 was $12.2m. Well above the $1.1m listed on their site.

It's shares not cash, so I'm assuming that the $1.1m was not directly from $LMND rather its foundation,

The $1.1m may have come as a cash contribution being classified as "Other insurance expense"

Is this up to 40% of unclaimed premiums? Hard to tell. Unclaimed premiums or claims are not a seperate line item in their financial reports.

But I doubt it considering annualized total revenue stands at $17.8m

Total Revenue does not equal gross written premiums, nor earned premiums so for this exercise, I accept its difficult to calculate.

Could it be purposely obfuscated? Yes.

Is it? That's a big allegation which Citron is somewhat making.

Some selected social posts on their site note up to 32% of their unclaimed premiums have been designated to charities.

I hope that if audited, $LMND could provide an (but ideally multiple) examples to meet their claim of 40%

Additionally, given that $LMND has crossed over the 1m customer mark, "only" 34 nonprofits received a donation. I'm assuming that users have a limited variety of nonprofits they can choose, or that most actually don't choose and $LMND chooses for them.

While you may disagree with the valuation, allegations of fraud should not be made lightly. I'm sure $LMND could make it clearer as to what % of unclaimed premiums are actually donated, without revealing claim rates.

That said, I think there are better battles to be fought with companies not engaging in ESG efforts at all. I understand how the ESG movement may be abused by marauding capitalist's, I just don't think $LMND is one of them.