First Posted on Investors.com Edition Sep.18, 2013
Shares of Benefitfocus (BNFT) soared after the company’s initial public offering Wednesday, in one of the stronger first-day performances for an IPO this year.
The company has built a cloud-based subscription service that helps employers and insurance carriers manage their benefit plans, including health care, dental, life and disability insurance.
Shares were priced at $26.50, which was $2 above the high end of its anticipated range, and opened at 42.50, a jump of 60%. There were 4.5 million shares sold, raising $119 million.
The stock hit a high of 49.64, up 87%, before settling back to 47.12 in mid-afternoon trading on the stock market Wednesday.
Its software-as-a-service business model is used primarily by large companies, insurance carriers and brokers.
Company co-founder, President and CEO Shawn Jenkins rang the opening bell for the Nasdaq Wednesday, where Benefitfocus trades under the ticker BNFT. About 50 company associates were by his side.
“We’re passionate and excited,” Jenkins told IBD. The company sees a large business opportunity ahead.
According to the company’s S-1 prospectus, U.S. insurance companies spent $55 billion on software and related services in 2012, citing research from Gartner. Additionally, spending on human resources and benefits administration totaled more than $59 billion last year, according to IBISWorld.
For the six-month period ended June 30, sales at Benefitfocus rose 24.5% over the year-ago period to $48.2 million. It reported a net loss of $16 million in the period, as the company invested heavily to expand business operations. Benefitfocus invested $20 million on sales and marketing and $10.5 million on research and development in the latest six-month period.
“We’ve built an enormous customer base, but the market is large and underpenetrated,” Jenkins said.
Benefitfocus estimates there are 18,000 companies in the U.S. that employ more than 1,000 workers. Benefitfocus has signed up 348 of them, up from 286 last year, Jenkins said. And there are about 300 companies selling insurance and related products, of which 37 are Benefitfocus customers. About 20 million consumers are on its platform.
The company was founded in 2000 and employs about 800.
The IPO comes at an opportune time, in that with health care reform under way, with all manner of complicated regulations, Benefitfocus enables companies and carriers to adapt to the new requirements.
“We’re enabling the industry to move forward,” Jenkins said.