The media has not been kind to Castlight, the cloud based healthcare tech company that had its IPO last week.
Yahoo Finance called it the “most overpriced IPO of the century.”
It IPO’d at a $US1.4 billion valuation, even though it had $US13 million in revenues. The company’s losses are five times its 2013 revenues, and its marketing costs are three times its revenues.
Still, on the first day of trading, Castlight went nuts, soaring 149%.
But now the stock is tanking. It’s down 30% from its post IPO high of $US40-plus, and opened this morning at $US27.49.
IPO investors are still doing fine. It was priced at $US16.
In just five days, Castlight has become the poster child for people who believe the current tech boom is nuts. The company’s financials are to blame. Sure, it’s growing, but it’s not demonstrating the scale of growth that would command the $US3 billion market cap it had a few days ago: Its $US13 million in revenue was up from $US4 million last year.
To be fair to Castlight, it’s in a business than does indeed have billion-dollar potential. The company works with employers to provide a database that creates transparency and pricing information for healthcare and medical procedures. It you’ve ever tried to figure out the cost of a healthcare procedure before making an appointment, you’ll know how impossible that is without something like Castlight to help. The company says CFOs can cut employee health costs by $US10,000 per worker using Castlight. Its clients include CVS Caremark, Microsoft and Wal-Mart.
With customers of that size, and assuming Castlight’s system delivers on its promises, you can see why investors believe the company may be creating a giant new health data market.
But the sceptics are… sceptical. Here’s what they’re saying:
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