Shares of car-insurer Root (NASDAQ:ROOT) stock are up by over 35% today, bringing its year-to-date gain to over 200%. Earlier this week, The Wall Street Journal reported that Embedded Insurance (EI) made an offer to acquire the company for $19.34 per share, giving it a valuation of over $80 million. Shares of ROOT stock were trading at less than $6 on Monday and are currently above $13.
On June 9, EI co-founder James Hall privately sent Root’s board a proposal to buy out the business. Hall has attempted to acquire the company since July 2022. Root CEO Alex Timm then proceeded to make several requests to the offer, which EI has addressed, according to the WSJ.
However, the deal has not closed yet, which is why ROOT is still trading at a discount to its $19.34 acquisition price. The discount reflects uncertainty regarding the completion of the deal. EI seems adamant about the buyout, as it has agreed to put an equity check into escrow before finalizing the deal.
Citi analyst Michael Ward, who has a ROOT price target of just $5, believes the buyout price is at a major premium, explaining, “We view a sale at such a significant premium as logical, and note price/NPW multiple would peg ROOT on the higher end of auto insurers, despite plans for continued shrinking + the challenging auto insurance environment.”
5 Investors Betting Big on ROOT Stock
Tracking institutional ownership is important, as these large investors provide liquidity and support for stocks. During Q1, only 70 13F filers disclosed a stake in ROOT, a decline of 18 filers from the prior quarter. In total, the filers own 6.22 million shares, while six of them own the company in their top 10 positions.
Based on the low 13F ownership, it’s safe to say that institutional investors did not see this acquisition coming. Meanwhile, the institutional put/call ratio sits at 0.39 as of Q1, down from 0.75. That’s equivalent to roughly 130,100 puts and 330,590 calls, implying a bullish options stance.
With that in mind, let’s take a look at the largest shareholders of ROOT:
- Carvana (NYSE:CVNA): 3.14 million shares. Carvana’s stake is accurate as of Q3 of 2022. During then, it sold off 10.90 million shares.
- Ribbit Capital: 1.63 million shares. Ribbit’s stake remained unchanged during Q1.
- Drive Capital: 1.61 million shares. Drive’s stake is only accurate as of Q4 of 2021 and is likely have to changed since then.
- Alex Timm, CEO: 1.06 million shares. Timm’s stake is accurate as of Q4 of 2022.
- SVB Financial Group: 783,012 shares. SVB’s stake remained unchanged during Q1.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
