Connecture, a company that develops Web-based software designed to aid consumers shopping for health insurance, said that it has raised $52 million from investors in an effort to bolster its financial position.
In a news release, Brookfield, WI-based Connecture (NASDAQ: [[ticker:CNXR]]) said it will use the money “to strengthen its financial profile through reduced leverage and accelerate its growth opportunities.”
Connecture said that under the terms of the deal, it will issue and sell Series A preferred stock, which could later be converted into common stock.
Carolyn Edwards, a spokesperson for the company, said in an e-mail that investors are receiving about 11.5 million shares, which would work out to about $4.52 per share.
Two groups provided the funding, Connecture said. The lead investor is Francisco Partners, a private equity firm based in San Francisco. The other participant is Louisville, KY-based Chrysalis Ventures, which had invested in Connecture before it raised about $53 million in an initial public offering in December 2014. At the time of the IPO, the company’s starting share price was $8, well short of the projected range of $12 to $14 per share.
Things have mostly gotten worse in the year-plus since. The stock’s performance was mixed during the first half of 2015, topping out at $14.39 a share. Then in August, Connecture reported quarterly earnings that missed analysts’ forecasts. The company’s stock fell below $8 per share that month, and has not returned to that level since. As of this writing, shares were trading at $2.72, a decrease of more than 11 percent for Tuesday.
The company generated $95.8 million in revenue in 2015, up from $84.6 million the previous year. Connecture isn’t profitable, though; it reported a $7.3 million net loss in 2015, compared with a $10.2 million net loss in 2014.
Under the terms of the deal announced Monday, Francisco Partners co-president Ezra Perlman will join Connecture’s board of directors, according to the news release. Connecture CEO Jeff Surges, who assumed that role late last year, said his company will benefit from Francisco’s industry experience.
“Francisco Partners brings a wealth of relevant healthcare experience and resources to the table,” Surges said in a prepared statement. “In addition, we are pleased with the continued support of our strategy and vision by Chrysalis Ventures.”
Private investment in public equity—or PIPE—deals like this one frequently involve cash-strapped businesses, according to reporting by the Wall Street Journal. Such transactions are often considered unfavorable for existing stockholders, whose shares are diluted.
Before going public, Connecture had raised more than $41 million from investors. Chrysalis, which held a 28.5 percent stake in Connecture prior to the IPO, has also invested in at least one other healthcare software company with Wisconsin ties—MyHealthDirect, which makes scheduling tools.
