ShiftPixy recently listed on the NASDAQ: PIXY, marking the success of their Regulation A+ IPO. There have now been three Reg A+ IPOs in the last three weeks. On June 12th MYO listed on the NYSE through their Reg A+IPO, then on June 16th ADOM listed on the NASDAQ having used Regulation A+ for their IPO as well.
At this point, it’s fair to say that the momentum of the Reg A+ industry is accelerating. These three IPOs demonstrate that Reg A+ is a viable method by which to take small-cap companies public. To see the advantages of using Reg A+ for IPOs to The Big Board and the NASDAQ Click here.
ShiftPixy has an innovative and disruptive business model. When companies become their client, ShiftPixy takes over the responsibility for employment compliance for their part-time and shift workers. The employees switch to become employed by ShiftPixy, with the advantage that they can work not as independent contractors but as employees, enjoying the protections of workers’ compensation coverage and get access to healthcare and 401K benefits as a result. The client company benefits from a less complex and lower overhead way to grow their business.
The company raised $12 mill of capital at a pre-money valuation of $159 mill at $6 per share, from approximately 450 investors, with a minimum investment per investor of $600 and with an approximate average investment amount of $26 k. This indicates that most of the investors came through the efforts of the broker-dealer syndicate. Scott Absher, CEO, and Founder told me that the syndicate assembled by WR Hambrecht included more than 15 broker-dealers. When investors inquired about the offering at the company’s website Scott’s team referred them to members of the broker-dealer syndicate – a good way to gain the attention of their account representatives.
ShiftPixy is one of those companies that we rarely see – one that builds from the “idea on a napkin” stage through to a publicly held, listed company with a market cap of $172 mill (at the Issue), in the space of just over two years. Scott Absher, CEO and founder of ShiftPixie, said: “Reg A+ is brilliant because it democratizes access to capital for companies and for the little guys – investors who were never able to get into IPOs till now”.
Net revenues grew from a $4.6 mill annualized run rate in early 2016 to $22 mill annualized run rate in early 2017, while gross revenues grew from $3.9 mill to $66 mill on the same basis. Clearly, ShiftPixi’s net revenues are more reflective of the scale of the business in conventional terms. Their growth rate is impressive, and when ShiftPixy expands from the restaurant and hospitality fields and also increase their geographic scope, this is a company that can serve a very large market.
This offering had a re-start earlier in 2017 after their first pass at Reg A+ that was launched in 2016 did not work out. The renewed offering was “fully subscribed two weeks after going live to investors and is now oversubscribed”, Scott said.
WR Hambrecht & Co led the broker-dealer syndicate that raised capital for ShiftPixy and according to Scott, the group made a full court press to bring in investors and squeezed their margins to make room for their broker-dealer syndicate members, apparently taking the long view that the success here will translate into more transactions as Reg A+ gets into stride. Zack’s Research is following the company.
What Can We Learn from These Three Regulation A+ IPOs?
These IPOs are the trailblazers. They were not overnight successes that happened on autopilot. They were difficult and slow to complete compared to what we will experience in the coming years, and the efforts put up by all concerned are all the more impressive for that. There has been a lot of learning in the Reg A+ industry to reach this point and the process continues.
It’s important to note that Reg A+ offerings are far easier to make work at this stage for companies that have strong appeal to consumers. That makes the successes of the three IPOs more impressive because they drove to success regardless.
Will We See One Reg A+ IPO per Week as a Sustaining Number from Now On?
No, that would be far too much to expect at this stage! All three of these offerings took quite some time to get through their journey. The fact that they all arrived in a three week period is a positive punctuation mark that is driving up awareness of the benefits of using Reg A+. What I am seeing is a growing number of well-qualified companies engaging with and evaluating Reg A+. The result will be steady growth in the number of successful Reg A+ offerings and IPOs.
Note that I may buy or sell shares in PIXY in the aftermarket so I may have a conflict of interest when you read this article. I am not recommending that you buy or sell this stock.
Rod is a Forbes Contributor. Read the read the full version of this column on Forbes.com.
Rod Turner is expert in entrepreneurship and raising capital. As CEO of Manhattan Street Capital he helps Real Estate, Mid-Stage companies, Startups & Rollups raise capital via Regulation A+. Check the Manhattan Street Capital our Blog for more in depth guidance. I hope you find this guidance informative and helpful!