IPO advisory firm puts Benefitfocus on watch list

By Matt Tomsic
Published April 8, 2013

An IPO advisory firm has placed Benefitfocus on its watch list, and the Daniel Island-based company’s business model would be appealing to investors if it goes public, it says.

“We think that this is going to be of interest to investors,” said Kathy Smith, principal for Renaissance Capital, an initial public offering investment firm that does pre-IPO research for institutions and advises them. “It’s hard to do too much critical thinking on it because we need to look at the company — and we will — and dive into the numbers and study the disclosure.”

Reuters first reported Benefitfocus was considering an IPO in March, citing “two people familiar with the matter.” Benefitfocus has said it won’t discuss whether the company is considering going public.

Renaissance Capital is tracking the tech firm and has placed it on a watch list that monitors private companies that may be considering going public.

Smith said a handful of criteria make 2013 a good time for companies to go public and make Benefitfocus an attractive investment.

So far in 2013, dollars raised from IPOs are up 25% year-over-year, Smith said, while the number of companies that have filed IPOs is down.

“We expect to see the numbers pick up because there was a strong uptick in activity as we finished the quarter,” she said, adding post-IPO trading is up 11% according to an index compiled by Renaissance Capital. “The returns so far are very good.”

Investors, meanwhile, are interested in larger companies that have filed IPOs.

“Investors are looking for more established companies with a track record of cash flow generation or a business model that suggests a certainty of cash flow generation and growth,” Smith said.

Benefitfocus opened in 2000 and employs more than 700. The company manages health care and other benefits for employers, insurance carriers and consumers through a Web-based platform.

“That’s an attractive business model,” Smith said. “With this company in particular, I think that its business model, it’s been around for a while; we expect to have a good growth rate. We’re thinking this would be of interest to investors.”

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