Hippo.com domain name acquired for $3.3 million

Careful analysis of recent SEC filings allow us to conclude that the Hippo.com domain name was acquired for USD $3.3 million in the first quarter of 2021.

In my weekly review of SEC filings using the EDGAR system, I found an interesting clue in a filing by Hippo Enterprises, a US-based insurance technology company. On page F-106 of their filing, they disclosed a $10.5 million book value for “State Licenses and Domain Name” for the period ending March 31, 2021 in the “Intangible Assets” table. In the same table, that balance was $7.1 million for the period ending December 31, 2020.

That suggested to me that a domain name acquisition may have accounted for the $3.4 million difference between those 2 dates. But, is there anything else that could provide further evidence? It turns out there is!

On page F-68 of the same filing, there’s another “Intangible Assets” table for a different set of periods, namely for the periods ending December 31, 2020 and December 31, 2019. In this table, they only refer to “State licenses” having a book value of $7.1 million and there’s no reference to a “domain name”! Page F-83 also lists the book value of the state licenses as $7.1 million.

Thus, we can infer that a single domain name purchase in the first quarter of 2021 explains the $3.4 million difference between the “State Licenses and Domain Name” book value of $10.5 million for the period ending March 31, 2021 and the “State licenses” of $7.1 million for the period ending December 31, 2020.

Furthermore, on page F-98 in the “Consolidated Statements of Cash Flows”, there’s a “Purchase of intangible assets” in the amount of $3.3 million, which is nearly identical to the $3.4 million figure noted above. The difference is most likely due to rounding issues** (see note at end of article), or potentially a further investment of up to $0.1 million in the first quarter of 2021 for state licenses. Regardless, I’d be more confident in using the $3.3 million “purchase of intangible assets” figure as the more accurate value of the domain name purchase (if anything, it’s a more conservative approach). [It’s a single rounded value, which should be more precise, whereas the $3.4 million figure is the difference between two rounded values.]

Based on the above, we still don’t know which domain name was acquired. However, it had been reported in 2019 that the company had secured the one-word Hippo.com domain name, matching their corporate brand. Given that there was no prior “domain name” balance recorded on the company’s balance sheet, we can infer that the domain name was perhaps rented with an option to purchase (with that option exercised in 2021), or was leased over time (with the lease ending in the first quarter of 2021). [the rental with the option to purchase scenario is more consistent with the accounting disclosures of the cash flows; had there been equal payments over two years for a lease, some of that $3.3 million should have shown up in different accounting periods, instead of all in one quarter]

Could there have been a $3.3 million purchase of a different domain name? That appears very unlikely, as they’re not known owners of any other high profile domains at this time (conceivably others domains could be owned but hidden behind WHOIS privacy). Furthermore, even if they had purchased some other high value domain for $3.3 million in the first quarter of 2021, they still would have had to have put Hippo.com on their balance sheet somewhere, as it would have been a material acquisition (and then they would have used “Domain names” in the plural on their balance sheet). Given they announced in early March 2021 their intentions to go public, it would make perfect sense to make sure that they owned outright their matching dot-com domain name, if they had previously been renting/leasing it.

I think it’s safe to conclude that there’s no other mystery domain name purchase, and that Hippo.com was the domain name that was purchased in the first quarter of 2021 for $3.3 million.

[**A Note On Rounding Issues: To understand why rounding issues can completely explain the difference between the $3.3 million vs. $3.4 million values above, consider the following:

If the domain purchase was $3,345,000, and the state licenses had a book value of $7,145,000, then they’d each be recorded at $3.3 million and $7.1 million respectively when rounded to the nearest $100,000 (as the accounting records were for Hippo’s SEC filings). If you add those two hypothetical non-rounded numbers up exactly, to come up with “State Licenses and Domain Name”, they would amount to $3,345,000+$7,145,000 which equals $10,490,000. Rounding the $10,490,000 value to the nearest $100,000 would lead to a disclosure of $10.5 million (just like it was in the financial statements above).

Thus, looking at the “purchase of intangible assets” value, which is only rounded one time, should be a more accurate value for the domain name, rather than subtracting two other values each of which has already been rounded.]