Castlight Health Soars in Debut; Shares More Than Double
San Francisco-based Castlight Health Inc. (NYSE:CSLT), a young company that makes software that tracks healthcare costs, skyrocketed on the New York Stock Exchange this morning. The shares more than doubled in their first day of trading, giving Castlight Health one of the best first-day initial public offering performances of 2014 thus far, according to the New York Times. It’s worth noting that well over half of the biggest IPO debuts of 2014 have been biotech firms.
Shares of Castlight opened at $37.50 on Friday; the shares were priced at $16 on Thursday evening. The company raised more than $178 million after pricing its IPO of 11.1 million shares, according to a Reuters report.
Castlight makes software that helps companies both track and analyze the cost of providing its employees with health insurance, making most of its money through sales of its software suite. Among its customers are companies such as CVS Caremark, T. Rowe Price, and Tesla, according to a New York Times report. The company has signed more than ninety-five customers in the last two years.
The company is betting that soaring healthcare costs and norms for greater transparency will help create a rising demand from companies for data aggregation and analytics, Reuters reports. The company estimates that the potential market for its services is about $5 billion.
“We are focused on solving the biggest problem for the American enterprise, which is healthcare cost,” said Giovanni Colella, Castlight’s founder and CEO, per NBC. “If we do that well, we create a ton of value for everybody.” Bryan Roberts, a Castlight co-founder and chairman, added that the company hoped the IPO “would be an interesting means to raise awareness” amongst potential customers and employees.
Castlight was founded in 2008 and counts amongst its board and founders many big names: Todd Park, a founder, is also President Barack Obama’s chief technology officer. Robert Kocher, a special assistant to Obama, who helped develop the Affordable Care Act, is a member of the company’s board; another director, David Ebersman, is the chief financial officer of Facebook.
The company has since reported a sevenfold rise in revenue, to about $13 million, between 2011 and 2013; simultaneously, net loss grew from $20 million to $62.2 million. With the money raised from the IPO, Castlight CEO Colella says he expects the company will be able to break even in the near future.
Speaking about Castlight’s incredible success, Jay Ritter, a professor at the University of Florida and IPO expert, told Reuters, “Investors are building very optimistic assumptions into the stock price and are of the opinion that it has a technology business model that they can protect from competition and earn big profits.”
More From Wall St. Cheat Sheet: