Benefitfocus, Inc. ($BNFT), a provider of cloud-based benefits software solutions for consumers, employers, insurance carriers and brokers, rang the opening bell at Nasdaq Wednesday, which seemed more like a shot signaling for the stock to start sprinting straight ahead on its first day of trading.
As Equities.com analyst Francis Gaskins noted in his IPO report on Benefitfocus, the company is a subsidiary of The Goldman Sachs Group (GS) , which holds 66-percent of pre-IPO shares, making it likely that the company would promote it to its clients. Gaskins also noted “…the IPO market likes cloud-based software companies with a subscription-based revenue stream,” even though Benefitfocus has yet to deliver up to expectations.
In the six months ended June 30, revenue at Benefitfocus climbed to $48.2 million, up about 25 percent from the year prior quarter. Net loss was $16.0 million for the quarter.
In addition to the IPO hype and the run to new highs on Wall Street with the Federal Reserve opting to hold off on tapering for the moment, it also seems that Benefitfocus got a lift from Walgreen Co. (WAG) announcing today that it is going to provide its more than 160,000 eligible employees with employer-sponsored health insurance coverage in 2014. Time Warner Inc. (TWC) and International Business Machines Corp. (IBM) have recently announced similar plans to move employees to private health exchanges, decisions that fall right into the wheelhouse of Benefitfocus.
There’s been plenty of debate about the rise of private health exchanges that are cropping up all over the country in response to Obamacare, which will provide subsidies to low- and middle-income Americans to help pay healthcare costs starting in 2014. Some employers are shying away from public markets (which is where anyone receiving a subsidy will go) and setting up private insurance plans.
Benefitfocus, which offers software to manage those types of benefit plans, is betting that more large companies will continue to go the private exchange route. The company says there are about 18,000 large companies (more than 1,000 employees) in the U.S. that are potential clients. Right now, Benefitfocus has about 350 of those companies in its portfolio.
4.935 million shares were priced at $26.50, $2.00 more than the high end of the expected range. Those original prices were left in a cloud of dust with the stock printing $42.50 at the opening bell. Shares rose as high as $55.87 before closing the first day at $53.55 for gains of 102 percent from the IPO price.
Goldman, Sachs & Co., Deutsche Bank Securities Inc. and Jefferies LLC acted as the book-running managers for the offering with Canaccord Genuity Inc., Piper Jaffray & Co. and Raymond James & Associates, Inc. serving as co-managers. The underwriters were a granted 30-day option to purchase up to 740,250 shares of BNFT stock at the IPO price.