Castlight Health soars in debut as cloud offerings shine

Fri Mar 14, 2014 9:28pm IST

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(Reuters) - Shares of healthcare information provider Castlight Health Inc (CSLT.N) rose more than 160 percent in their debut, making the listing the strongest by a technology company so far this year.

Castlight raised $178 million after pricing its IPO of 11.1 million shares at $16 per share, above its expected range.

The company provides cloud-based software to help companies manage their healthcare costs.

Castlight's shares opened at $37.50 and touched a high of $41.95 on the New York Stock Exchange, valuing the company at about $3.63 billion.

"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," said Jay Ritter, a professor and IPO expert at the University of Florida.

Castlight was co-founded in 2008 by Todd Park, the chief technology officer of the United States who is tasked with fixing the U.S. government's troubled new healthcare website. Park joined the Barack Obama administration in 2009.

San Francisco-based Castlight is betting on rising demand from companies for healthcare data aggregation and analytics tools amid soaring healthcare costs and norms for greater transparency.

U.S. healthcare spending is expected to touch about $3.1 trillion in 2014, with $620 billion of this coming from employers, Castlight had said in its IPO filing, citing data from Centers for Medicare and Medicaid Services.

The company estimates a potential $5 billion market opportunity for the kind of services it provides, based on the total number of people who rely on healthcare funded by self-insured employers.

A self-insured group health plan is one in which the employer assumes the financial risk for providing health care benefits to its employees.

Castlight reported a seven-fold rise in revenue to about $13 million between 2011 and 2013, while net loss widened to $62.2 million from $20 million.

Other co-founders of the company include Bryan Roberts and Giovanni Colella, who is also its CEO.

Park and Roberts were also part of the group that created AthenaHealth Inc (ATHN.O). Roberts is a partner with venture capital firm Venrock Associates LP, the biggest shareholder of Castlight with a 20.6 percent stake.

The company also counts Oak Investment Partners LP and Fidelity Investments among its stockholders.

Castlight, which also operates the Castlight Mobile platform, counts Aetna Inc (AET.N) Cigna Corp (CI.N), Truven Health Analytics Inc and ClearCost Health as rivals.

Castlight, which has signed more than 95 customers in the last two years, also offers to customers complex, large-scale data analytics of health care providers, insurance companies and governmental agencies.

Goldman Sachs & Co and Morgan Stanley & Co were lead underwriters for the offering.

(Reporting By Neha Dimri in Bangalore; Editing by Savio D'Souza and Maju Samuel)

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