Oklahoma City-based payroll services company Paycom hopes to raise up to $100 million in an initial public offering.
While most of the company’s stock will be controlled by a New York private equity group after the offering, going public could allow Paycom to compete on a larger stage, observers said.
Going public will enable Paycom to better compete with larger payroll and human resources services competitors, like ADP, with a market capitalization of about $37 billion, or Paychex, which has a market capitalization of about $15 billion, said Edmond money manager Greg Womack of Womack Investment Advisers. With a bigger pool of capital raised from shareholders, Paycom could even expand its services and products to better compete with larger companies, he said.
“They can take some of the market share from the big boys and step things up to the next level,” Womack said.
Paycom likely wants to take advantage of the stronger IPO market, particularly for tech companies, said Jake Dollarhide, CEO of Longbow Asset Management Co. in Tulsa.
“After cooling off, only in the last few years have we seen the IPO market get healthier and we’ve seen a record issuance in new stocks, predominantly tech plays like Paycom,” Dollarhide said.
The price of the stock and number of shares issued has yet to be determined.
Paycom will trade on the New York Stock Exchange under the ticker symbol “PAYC.” The company reorganized in Delaware as Paycom Software Inc. in January in anticipation of the public offering, it said in papers filed Monday with the U.S. Securities and Exchange Commission.
The private equity firm, Welsh, Carson, Anderson & Stowe, now holds a 56.6 percent stake in Paycom and will continue to hold a majority stake in the company’s outstanding stock after the public offering, according to Monday’s regulatory filing. Paycom founder Chad Richison currently has a 24.2 percent stake in the company, the filing said.
The private equity firm also will control four out of seven director seats at Paycom, according to the filing. Welsh, Carson, Anderson & Stowe’s total assets exceed $20 billion, the filing said. The private equity firm invests in information and business service and the healthcare industry.
How it will be used
Paycom will use the proceeds from the public offering to repay about $64.9 million in outstanding loans to Welsh Carson Anderson & Stowe, the company said in the registration statement.
In the registration statement, Paycom said it was banking on the growing automated payroll services industry to continue to drive growth at the company. The U.S. market for payroll services will be an estimated $16.2 billion in 2014, according to the statement.
“Selling shares to the public is one of the most efficient ways to raise large sums of money,” Dollarhide said. “Whether or not it will be good for investors, only time will tell. But certainly they are in the right industry insofar as HR and payroll processing.”
Paycom has seen year-over-year revenue growth of 40 percent, from $76.8 million in 2012 to $107.6 million in 2013, according to the filing. The company realized a profit of $7.7 million in 2013 and $4.2 million in 2012.
In the filing, Paycom said it had experienced rapid growth in its operations over the past two years. The company has grown from 523 employees at the end of 2011 to 840 employees at the end of 2013. The company has expanded its presence by opening new regional offices across the country over the past several years, growing from 18 offices at the end of 2011 to 24 regional offices at the end of 2013.