Benefitfocus Secondary Offering Will Eliminate 2 of Its Top Holders

Benefitfocus Inc. (NASDAQ: BNFT) has seen its shares recently hit all-time highs. The company announced earnings after the close of trading on Tuesday, but its shares are getting battered because a shelf registration for a secondary offering is going to eliminate two of the five largest institutional shareholders. This will also add a substantial amount of free-floating shares available to the public.

Benefitfocus is a cloud-based benefits management platform and services provider. The company announced that certain funds managed by Goldman Sachs and by Mercer have filed to sell an aggregate of 5,704,758 shares of common stock in a secondary offering. The company will not receive any proceeds from the sale of the shares by these selling stockholders.

While the company said the offering will not impact the number of shares outstanding, this still increases the free float of shares that individuals and/or other institutions can more easily purchase.

The company did report earnings of $0.14 in adjusted earnings per share on revenues of $74.8 million. Refinitiv (Thomson Reuters) had its consensus estimates as $0.10 EPS and $72.9 million in revenues. Its guidance for first quarter revenues of $66.5 million to $68.5 million was under the consensus estimate of $71.5 million.

Goldman Sachs Group,Inc. (NYSE: GS) is listed in the automatic shelf registration as owning 3,791,835 shares of common stock, an 11.8% stake in the company, and it will hold just 48,889 shares after the offering. Goldman Sachs spent just over $100 million back in 2007 to purchase what was roughly 66% of the business around its 2013 IPO.

Mercer, under the Marsh & McLennan Companies Inc. (NYSE: MMC), is shown to be the other shareholder selling shares. It was shown in the shelf registration that Mercer owns 2,817,526 shares, an 8.8% stake, and it will own 0 shares after the offering.

The sale will be led by JPMorgan, Goldman Sachs and Merrill Lynch. Co-managers for the offering were listed as Piper Jaffray, Raymond James, Wedbush Securities and First Analysis Securities.

This will leave funds managed by Fidelity, BAMCO, Vanguard, BlackRock and Artisan Partners as the top five institutional holders with a combined 44% of the float.

Benefitfocus shares closed down 0.8% at $57.80 on Tuesday, in a 52-week range of $21.75 to $60.66. Its market cap at the close of trading was $1.85 billion, but its shares were initially trading down 8.8% at $52.70 after the news.

This company came public in 2013 at $26.50 per share in a 4 million share initial public offering.