Bright Health raises $924M, making it the largest IPO ever in Minnesota

Bloomington-based Bright Health raised $924 million Thursday in the largest-ever initial public stock offering by a Minnesota company, bolstering the state's influence across national health insurance markets.

The founders of Bright Health — which got its start in the individual markets on the government-run exchanges — came from UnitedHealth Group, the Minnetonka-based giant that runs the largest U.S. health insurer and also is a large operator of clinics, urgent care facilities and surgery centers.

Having already expanded into the Medicare market, Bright Health plans further growth with Medicaid and employer health plans as well as a division that manages a network of doctors and clinics.

The $924 million raised by Bright Health eclipses recent IPOs from Jamf Holding Corp., which raised $468 million in 2020, and Ceridian HCM Holding Inc., which in 2018 raised $531 million from its IPO and nearly $100 million more after a private placement.

Four other Minnesota companies — including Trean Insurance Group, Sun Country Airlines Holdings Inc., SkyWater Technology and Agiliti Health Inc. — also have gone public in the past 12 months.

Bright Health completed its offering in a busy week and busy year for IPOs, with health care and technology companies being the dominant issuers. According to NYSE.com, there have been 323 IPOs in the past 12 months that raised $1.6 trillion; 141 of them have been health care companies that together raised $39 billion, while 67 technology IPOs have raised $43.4 billion.

Nationally this week, seven companies completed IPOs. They included Eden Prairie-based life sciences company Miromatrix Medical Inc., which also priced its offering late Wednesday.

Miromatrix is trading on Nasdaq under the symbol MIRO. It is developing bioengineered fully transplantable organs that it says could provide better outcomes for patients and help alleviate the shortage of donated human organs. The company will use proceeds of the offering to fund further research and development and for clinical trials.

Miromatrix stock closed its first day at $15.24, up 69%.

The busy IPO season this spring also included one other big deal for a new health insurer when New York-based Oscar Health raised $1.4 billion in March. After an initial offering price of $39 per share, the stock has since fallen below $24.

The startups are hoping to capitalize on a push to make health care easier for consumers to navigate, said University of Minnesota health economist Stephen Parente.

"There certainly is more of an interest in consumerism and flexibility and more advanced tools — that's a lot of what they're selling in their messaging," he said.

Bright Health launched in 2015 with a focus on selling coverage to individuals who buy policies under the federal Affordable Care Act (ACA) via government-run health exchanges. These ACA markets are designed for individuals under age 65 who are self-employed or don't get coverage from their employer.

The startup insurer then moved into the Medicare Advantage market, where individual seniors receive their Medicare benefits through private managed-care insurers. Bright Health now covers about 515,000 people across 11 states through individual insurance policies and another 108,000 people enrolled in Medicare Advantage health plans.

Some growth has come through acquisitions of insurers in California and New Mexico. Bright Health now is trying to diversify into Medicaid coverage as well as selling administrative services to employer health plans.

The employer market is particularly attractive to insurers because it provides a strong, steady source of income, Parente said.

Traditionally, new insurers have struggled to create doctor and hospital networks that are attractive to employers, he said. That's one reason why Bright Health is highlighting the company's division called NeueHealth, with ties to more than 200,000 health care providers plus 28 managed and affiliated risk-bearing clinics.

Parente said the NeueHealth unit sounds similar to the Optum health services division at UnitedHealth Group, which manages a growing network of clinics focused on "value-based care" agreements with health insurers. Under these contracts, clinics can see financial rewards for efficiently providing health care.

"Through these risk-bearing clinics, NeueHealth maintains nearly 75,000 unique patient relationships as of April 2021, approximately 30,000 of which are served through value-based arrangements, across multiple payors," the company said in a regulatory filing. "In addition to our directly managed and affiliated clinics, NeueHealth manages care for an additional 33 clinics."

Over the past 18 months, Bright Health has acquired a Florida family practice group and a controlling interest in a second medical group, as well as the Minneapolis-based telehealth provider Zipnosis.

Going public means companies have access to more forms of financing to invest in additional growth and jobs while giving current shareholders and prospective shareholders easier means of buying and selling shares.

Chief Executive Mike Mikan and other executives from Bright Health rang the closing bell Thursday afternoon at the New York Stock Exchange. Bright Health will trade on the NYSE under the symbol BHG.

Bright Health's IPO was downsized in price and shares from projections in its latest SEC filing.

The company ended up selling 51.35 million shares at $18 per share. The company was expecting to sell 67.2 million shares in the range of $20 to $23 per share that could have raised close to $1.5 billion.

The IPO didn't generate buzz among traders, with shares closing Thursday at $16.47, down 8.5%

Underwriters for Bright Health have a 30-day option to sell an additional 6.2 million shares, which could increase the total amount raised to more than $1 billion.