E Accolade’s $100 Million IPO: A Good, But Overvalued Business

Healthcare company Accolade Inc. (ACCD, pending) has released preliminary information about its upcoming planned IPO. According to the Nasdaq, Accolade filed last Friday for a $100 million public offering. Underwriters include Goldman Sachs (GS), JP Morgan (JPM), and Credit Suisse (CS) among other banks.

The $100 million figure is a placeholder used to calculate filing fees, and we do not know Accolade’s planned valuation. However, McKesson Ventures reported last June that Accolade had a valuation of $620 million.

Yet recent IPOs, most notably the Casper (CSPR) debacle, has seen valuations fall dramatically as investors look at the numbers and storyline. With regard to Accolade there are reasons to be concerned about their business plan and financial numbers. Here are some of the key considerations.

Trying to improve Healthcare

Healthcare is complicated and expensive. Not just for workers, but for employers who offer healthcare benefits to said workers. Accolade argues that it can help customers engage and better understand their health benefits, which will let them take less expensive and more effective solutions which will help customer and employer alike.

In its SEC report, Accolade states that “the total annual employer cost for healthcare is estimated at more than $10,000 per employee” and that these costs are expected to keep rising without improving health outcomes. Accolade thus uses its own clinicians and health assistants, as well as a technology platform that uses machine learning and artificial intelligence. Accolade’s customers are large businesses with extensive healthcare plans, and Accolade states that its “primary offering was shown to reduce claims costs for an employer with more than 10,000 members by 6.5%, or $782 per employee per year.”

Accolade possesses high growth potential and argues that its total addressable market is $24 billion, and everyone knows that spending on healthcare will continue to increase over the next several years. Furthermore, Accolade has secured investors and partners, such as a $20 million investment from health insurance giant Humana (HUM).

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Disclaimer: I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it and have no business relationship with any company whose stock is mentioned in this ...

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John Doe 10 months ago Member's comment

Does Accolade possess patented intangible resources, or is their business model easy to imitate thereby hurting their outlook??

Stock Profit 10 months ago Member's comment

Do you know when they are planning to go public? This announcement was from a while ago.

Wannabe Warren 1 year ago Member's comment

Euan Jones, your analysis of $AACD is a sound one. Thank you for sharing.

Adam Reynolds 1 year ago Member's comment

Thanks for the warning!

Andrew Armstrong 1 year ago Member's comment

If Accolade's customers are major companies, do they need so many? 53 could potentially be significant, dependent on their size.

Dick Kaplan 1 year ago Member's comment

Perhaps, but being so dependent on a single company is problematic. And #Comcast is responsible for over 1/3 of #Accolade's revenue. That's a major red flag in my book. If Comcast dropped Accolade today, where would the company be tomorrow? $CMCSA $ACCD

Alexis Renault 1 year ago Member's comment

What happened with Casper? $CSPR

Edward Simon 1 year ago Member's comment

Hi Euan, Accolade sounds like an interesting company and the fact that they are a healthcare company may help them in the current environment, though I imagine they will probably postpone their IPO (provided they can find other funding sources). Still wondering why $100 million in your opinion is a high valuation given that the latest VC evaluation you cited in your article was $620 million?