Silver Lake Technology Management LLC, a tech-focused private equity firm in Menlo Park, netted some $4.8 million selling its 514,000 shares of Root (Nasdaq: ROOT) in batches from Nov. 8 through Monday, according to an ownership disclosure filed with the U.S. Securities and Exchange Commission.
The firm was one of two Silicon Valley investment firms that bought a combined $500 million in Root Inc. stock in conjunction with the Columbus digital insurer's IPO three years ago. The other shrank its holdings after one year.
Silver Lake took a loss of $245 million on its shares, according to the filing. As of this spring's proxy, the holdings represented 5.6% of the company.
Both the parent of Root Insurance Co. and Silver Lake declined to comment through spokespeople.
Root debuted on the Nasdaq in October 2020 at a higher-than-expected opening price, raising $1.2 billion and valued at $7 billion – the biggest offering in Ohio history. Its market capitalization as of Thursday was just under $137 million.
Silver Lake and San Francisco-based Dragoneer Investment Group LLC each bought $250 million in a private placement alongside the IPO.
When the two firms first listed their holdings as of Dec. 31, 2020, in quarterly reports required of investment managers, the value of each stake had shrunk to $145 million.
Dragoneer shed 70% of its Root stock between Sept. 30 and Dec. 31 the following year, according to quarterly reports of its holdings, known as Form 13F. The selling price was not available, but the overall value of its holdings declined by $40 million over the quarter.
As of this Sept. 30, Silver Lake's Root stock was worth $4.9 million, according to the filings, and Dragoneer's 154,000 shares was worth $1.5 million. The share counts were affected by a 1-for-18 reverse stock split in August 2022.
Because of the impact of preferred shares, Root's earliest VC investors and executives control 84% of the voting power in the company, according to its proxy. Courts have rejected class-action lawsuits by retail investors over the stock's decline.
Because of that IPO haul and a $300 million loan from investment group BlackRock Inc., Root still has about $500 million in cash despite continuing financial losses. The company drastically cut expenses through 2022, and for the past two quarters returned to growth in policyholders. Executives have projected turning profitable sometime in 2024 without issuing stock or taking on more debt.
