Update 04/21/2017: Saw a Google ad for ShiftPixy IPO today. Looks like it’s back on the WR Hambrecht homepage. We don’t know if this offering will be back on Motif. However, you can indicate interest again at WR Hambrecht.
Keep an eye out on Motif Investing for the offer.
I was surprised to find the ShifPixy logo on the Motif Investing IPO page early last week. Current Motif account holders can elect to subscribe to email alerts on this IPO.
Digging deeper, this may be the tip of the iceberg for this site and IPO investing in general.
Shiftpixy did not file a form S-1 with the SEC. This is the required form most companies need to file before going public the traditional way. Check out my S-1 Feed to see what I’m talking about.
Instead, ShiftPixy filed a Form 1-A. This filing indicates a new kind of IPO.
The Reg A + IPO and the Rise of Crowdfunding
This site has not dabbled into the emerging world of crowdfunding until now.
The ShiftPixy IPO is a “Reg A + IPO”. As in Regulation A, which is a law from 1933 that was updated by the 2012 JOBS Act (Jumpstart Our Business Startups) enacted by the Congress and signed by the President.
This law was clarified in March 2016, opening up IPO crowdfunding to non-accredited investors (that is, investors with a net worth below $1 million or $200,000 in income). So Reg A + IPOs are in their infancy.
In short, the Reg A + IPO is about making it easier for smaller companies to raise money in open markets, but with less disclosure than a traditional IPO.
But there are limits. These IPOs are capped at $20 million for Tier 1 offerings and $50 million for Tier 2 offerings. ShiftPixy is a Tier 1 offering.
A New Partnership?
What makes this even more interesting is Motif Investing‘s involvement.
Last year, Motif announced an exclusive deal with J.P. Morgan to offer IPO shares to its brokerage customers for public offerings led by the investment bank. We haven’t seen that relationship come to fruition yet.
But J.P. Morgan is not underwriting the ShiftPixy IPO. It’s being led solely by a Silicon Valley investment bank called WR Hambrecht + CO.
The ShiftPixy IPO may be the beginning of a new relationship between Motif and WR Hambrecht + CO. We assume that Motif built the IT platform to be able to handle IPO administration based on the J.P. Morgan announcement. Since nothing has developed there, perhaps they’ve found another partner to utilize the system.
This could be a one-time event. Or the beginning of a long-term relationship. Whatever it is, Motif eased this IPO opportunity into public view instead of splashing in with a big announcement.
Motif Investing didn’t send an email to its IPO email list to my knowledge. Instead, it put the ShiftPixy logo on the main IPO page for anyone to stumble upon. Perhaps this is due to the small size of the offering and non-traditional nature of it. Or maybe the bigger promotion is yet to come.
Who is WR Hambrecht?
The company was founded in January 1998 by Bill Hambrecht, a long-time Silicon Valley investment banker, notable for his role in convincing Google to pursue a Dutch auction-style IPO. The company is at the forefront of the Reg A + IPO opportunity and helped shaped the legislation that created it.
They also developed a product they call an OpenIPO which uses technology and transparency to benefit long-term investors instead of flippers.
If you explore their site, you’ll find a large history of past IPO clients. On the home page, they have upcoming IPOs listed, including ShiftPixy. They link to the same filings and documentation listed on Motif’s site.
Click on the ShiftPixy logo on the home page and you can register your interest in the IPO directly with WR Hambrecht + CO.
I indicated interest in the ShiftPixy IPO on the WR Hambrecht + CO site in addition to registering my interest with Motif.
I did this mostly out of curiosity. Could this be a new resource for small-time investors to participate in IPOs? I received a confirmation email from WR Hambrecht + CO, but aside from that, I don’t know how this IPO will be administered. Perhaps interested parties will be pointed to Motif. I’d rather use my Motif account anyways so I don’t need to open another account somewhere else.
Since there’s no press release, the whole relationship between WR Hambrecht + CO and Motif Investing is intriguing and requires more research. If you have any insight, please contact me.
What is ShiftPixy?
After all this talk about Motif and WR Hambrecht + CO, it’s time to look at ShiftPixy.
ShiftPixy is a relatively new company (founded in June 2015) that built a mobile phone app poised to benefit from the “gig economy” trend.
The product aims to capitalize on the movement towards temporary, independent, and shift-based employment that is, in part, a result of the Affordable Care Act (Obamacare).
How I understand it, the company partners with employers (a restaurant chain, for example), and hires their part-time employees as their own. Doing so allows the restaurant to use shift workers without having to pay for their health insurance. It’s essentially a staffing firm that is efficiently run through the use of a mobile app and robust HR department.
There’s only one onboarding with ShiftPixy. The shift workers are then considered ShiftPixy employees and can find opportunities with any of their employer partners.
ShiftPixy takes care of the staffing and administrative services, payroll, HR management, and health insurance. So the company is alleviating their customers from the requirement to provide health insurance and deal with all the compliance that comes with it.
The initial target is the restaurant and hotel industries. As of the filings, they serve 155 clients and more than 3,500 worksite employees.
The app was launched in beta on Labor Day this year (read the press release). But the company has generated $36 million in revenue during the first year of operation.
Revenue comes from wages, taxes, premiums and fees. The cost of goods sold will be quite high since they’ll be paying wages and benefits to employees. That said, they confidently expect to hit $2 billion in revenue in 24 months.
ShiftPixy is seeking to raise between $15 million and $50 million in an upcoming Reg A + IPO. The IPO is set to price at $8/share, for a total of 1,875,000 to 6,250,000 shares. These shares are on top of 26,213,800 existing shares outstanding, a majority held by founder Scott Absher and adviser and payroll processing partner Stephan Holmes.
If the full $50 million is raised, new investors would make up 19% of shares outstanding. If the minimum of $15 million is met, new investors would make up 7%. Shareholders will experience immediate and significant dilution (see Dilution in the filing).
The company expects to use the potential $46.4 million (after fees) in funding primarily to build insurance reserves, for business development, and to accelerate the technology platform development.
There’s a whole slew of information to digest in these filings. Carefully consider your investment.
ShiftPixy is expected to trade on the Nasdaq under the symbol “PIXY”.
Should you Invest in the ShiftPixy IPO?
If you’re considering an investment, I strongly encourage you to read the latest SEC filing, investor presentation, and offering summary thoroughly. It took me a while to grasp this business model. What’s written above is my own interpretation of the business model and filings and may not be completely accurate.
Access IPOs helps readers identify potentially investable IPO opportunities. We do not recommend participation in any upcoming IPO. You need to do your own research as to whether any investment is right for you.
All IPO carry a higher amount of risk. Since Reg A + IPOs are limited in their size, only certain types of companies can utilize them. These companies are mostly in the startup phase of growth. Meaning that investing in a Reg A + IPO is more crowdfunding rather than a traditional IPO.
This is startup investing. The risk/reward spectrum is wider than a traditional IPO.
There’s a real possibility this IPO will not go through if the underwriters can’t hustle up $15 million.
Even if the IPO goes forward and the shares begin trading, the float will be quite small and shares possibly illiquid. This adds risk to the investor.
Please do your research and only invest if you can afford to lose all of the money you invest.
I intend to invest a minimal amount of cash to see the Motif IT platform in action and how WR Hambrecht + CO administers share allocations.
Now that ShiftPixy has filed their Form 1-A (and amendments) with the SEC, they are in a pre-qualification phase. While the SEC reviews the filing, the company and underwriters can work on generating interest for the IPO. The amount of demand for the IPO will determine if it goes forward. At a minimum, they need to attract $15 million dollars for the IPO to succeed.
Once the SEC approves the offering, investors can complete their investments through WR Hambrecht + CO and ShiftPixy’s investment bankers. Somewhere in the mix, I presume, is Motif Investing. Whether they are leading or supplementing the administration is yet to be determined.
Once at least $15 million is received, shares will be distributed to investors and start trading on the Nasdaq stock exchange. If the $15 million is not received, the IPO will likely be withdrawn.
For the latest information on the ShiftPixy IPO, bookmark the Upcoming Motif IPOs page on this website. You can also follow me on Twitter where I tweet news and alerts about upcoming investment opportunities.