Shares of Root, Inc. (NASDAQ: ROOT) rocket 112% as a potential buyer has emerged for the struggling car-insurance startup Root. Embedded Insurance, led by insurance-technology entrepreneur James Hall, has approached Root multiple times with an offer to acquire the company at $19.34 per share. This proposed price represents a substantial premium compared to Root’s closing price of $6.02 on Tuesday, which values the company at just over $80 million, significantly below its peak market value of $7.5 billion.

Hall privately submitted a proposal to Root’s board on June 9, following attempts to engage in negotiations since July of the previous year. Root CEO Alex Timm has responded to Hall’s inquiries with several requests, which Embedded Insurance has addressed. Despite the ongoing discussions, Hall remains interested in pursuing a deal.
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To demonstrate commitment, Embedded Insurance has pledged to place the entire equity amount required for the acquisition into an escrow account before finalizing any purchase agreement.
A spokesperson for Root mentioned in an email that the company’s board evaluates strategies to deliver shareholder value in accordance with their fiduciary duties.
Root’s journey since its IPO in October 2020, with a market capitalization exceeding $6 billion, has been one of decline. This initial public offering was considered a significant success for Root’s venture-capital backers, particularly Drive Capital and Ribbit Capital.
Established in 2015 and headquartered in Columbus, Ohio, Root is a technology-driven insurance provider that utilizes AI and data science to determine customer rates efficiently and streamline claims processing. In 2019, the company expanded its services to include renters insurance.
Root went public after other technology-powered insurance providers, such as SelectQuote, Lemonade (backed by SoftBank), and Hippo, also made their debut. However, these companies, including Root, have faced significant declines in their stock prices due, in part, to higher loss ratios associated with customer accidents. Root has consistently reported net losses since its inception.
Carvana, once a high-performing company, invested $126 million in Root in August 2021, receiving convertible stock and warrants. The two companies initiated a partnership to offer insurance to Carvana’s customers in 2022. However, Carvana’s sales and profits have been affected by declining used-car prices in the post-pandemic period, impacting the value of the agreement with Root.
Earlier this year, Root’s Chief Revenue and Operating Officer, Daniel Rosenthal, resigned from the company. Root also terminated its former Chief Financial Officer and Treasurer, Rob Bateman, for violating undisclosed company policies.
Hall has previously sold several of his businesses, including insurance-tech startup Salty Dot, which was acquired by CDK Global, and Insurance Point, which was acquired by Arthur J. Gallagher & Co.
What’s Retail saying?
Unsurprisingly, news of such deals tends to catch the attention of retail investors. The significant premium offered has caused a major stir, and the potential for a further 100% increase has kept investor interest high. As of now, after-hours trading has already pushed the stock up by 35%, and there are even suggestions from traders on Twitter, like “Lucia Perez StockWatch,” that a short squeeze similar to $AMC is possible and imminent. We will provide further updates as news unfolds, this will likely continue to experience volatility until the deal is finalized. It is crucial to recognize that speculative plays limited float pose substantial risks but also offer substantial potential gains. It is entirely possible to lose everything when trading a stock of this nature, so investors should exercise caution.
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