WageWorks Delays IPO Pricing After Worst Stock Slide Since ‘09

WageWorks Inc., the provider of human-resources services for companies including Ford Motor Co., postponed its initial public offering after U.S. stocks posted their biggest daily decline in more than two years.

The San Mateo, California-based company delayed its offering until next week from today, according to data compiled by Bloomberg. The Standard & Poor’s 500 Index plunged 4.8 percent, the biggest slump since February 2009, as investors sold on concern the global economy may relapse into a recession.

WageWorks earlier today slashed its IPO price range by as much as 43 percent to attract demand for its shares, which it is offering at a premium to other human-resources services companies. The offering has faced a weak equity market, with the S&P declining in eight of the past nine trading days, and new U.S. health-care laws that limit the use of flexible spending and health savings accounts, two of WageWorks’ services.

The company, which says it competes with U.S. health insurer Aetna Inc. and Automatic Data Processing Inc., is seeking to raise about $52 million selling 5.77 million shares for $8 to $9 each, it said in a filing with the U.S. Securities and Exchange Commission today. The company originally offered the shares for $12 to $14 each.

The midpoint of the new offering range would value WageWorks at about $212 million, or about 1.8 times last year’s sales, more than the average of about 0.5 times sales among 17 U.S.-listed human-resources services companies with a market value of less than $1 billion, according to data compiled by Bloomberg.

Barrett Business Services Inc., TeamStaff Inc. and Fortune Industries Inc., peers of similar size in the human-resources industry, all trade at lower multiples than WageWorks is seeking at the reduced range.

‘On-Demand’ Software

Sales at WageWorks, which has 37 Fortune 100 clients, rose 20 percent in the six months through June to $69.2 million from a year earlier, primarily because of takeovers, the company said in its filing. Full-year sales in 2010 were $115 million, 6 percent higher than the previous year.

Customers access WageWorks benefit programs through Web-based software, which allows the company to enhance its products quickly, it said in its filing. This “on-demand” business model also requires less up-front investment by customers compared with services that require on-site software installation, it said.

WageWorks customers offer the services to their employees as a way to reduce taxes. Using WageWorks, employees can opt to set aside a portion of their paychecks before being charged income taxes, and use that money to buy public-transportation passes or prescription drugs.

Owners of WageWorks include VantagePoint Capital Partners, Advent International Corp. and Camden Partners. All of the shares in the offering are being sold by WageWorks.

Credit Suisse Group AG and William Blair & Co. are leading the offering, according to the filing. The shares are scheduled to trade on the New York Stock Exchange under the symbol WAGE.

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