GoHealth goes public, raising $914M
Online insurance broker GoHealth raised $914 million in its public debut on Wednesday, well above expectations. The company, which focuses on selling Medicare Advantage plans, priced its stock at $21 per share, above its estimated range of $18 to $20. The company is selling 43.5 million shares of its common stock.
The Chicago-based company has been growing steadily since it was founded in 2001, when co-founders Clint Jones and Brandon Cruz were approached by an agent selling them individual insurance policies.
“We were working out of our house. It was all paper-based. We were asking why it wasn’t online,” Cruz, who is also GoHealth’s chief strategy officer, said in a phone interview.
First, they started building software, before eventually creating their own agency. The company grew quickly by selling individual plans created with the passage of the Affordable Care Act, but in the last four years, GoHealth has shifted its focus to selling Medicare Advantage plans.
“We were the largest enroller of ACA plans back in the day at one point. In early 2016, we shifted our focus to Medicare, and we’ve been all in on Medicare ever since.” – Co-founder and Chief Strategy Office, Brandon Cruz.
Last year, it was acquired by private equity firm Centerbridge Partners, in a deal that valued the company around $1.5 billion, according to Reuters. The IPO would give the company a valuation above $6 billion.
The company’s stock is now listed on Nasdaq as “GOCO.” It opened strong at $25 per share, but dipped to just over $19 per share by market close.
Cruz said part of the goal with going public was to build a stronger brand recognition with customers. The company plans to use part of the proceeds to further its growth.
“We don’t have any specific objectives as far as M&A, but we’ll keep our eye open if anything strategic comes along,” he said.
For the quarter ending in June 30, the company expects revenues between $118 million and $130 million, up 66% from last year at the midpoint. But the company also expects a net loss between $10 million and $26 million, compared to net income of $15.3 million during the second quarter of 2019, according to its prospectus.
For the full year of 2019, the company reported net revenues of $539.5 million and a net income of $30.5 million.
One potential risk is that GoHealth derives a large portion of its revenue from a handful of insurance carriers. For the first quarter of 2020, carriers owned by Humana and Anthem accounted for 42% and 32% of its net revenues, respectively.
GoHealth is one of several companies jumping into the stock market this month, which has climbed since the beginning of the pandemic.
“Like many companies, we were in the process already when the pandemic started taking hold and things became uncertain. We hit the pause button,” Cruz said. “Then it started to open up a little bit.”
GoHealth’s initial public offering is expected to close on Friday. Goldman Sachs, BofA Securities and Morgan Stanley acted as managing bookrunners.
