Healthcare payment software company Waystar made a splashy debut on the public market on Friday, raising a hefty $967.5 million. This successful initial public offering (IPO) marks the biggest health tech IPO since 2022, signaling a potential resurgence in investor interest for the sector.
Waystar, headquartered in Lehi, Utah, priced its IPO shares at $21.50 each, right in the middle of its anticipated range. The company, backed by major investors like EQT AB, the Canada Pension Plan Investment Board (CPPIB), and Bain Capital, sold a total of 45 million shares. Following the IPO, these investors will retain significant ownership stakes, with EQT, CPPIB, and Bain holding approximately 29.2%, 22.3%, and 16.8% respectively. Waystar plans to utilize the raised funds primarily to pay down existing debt, according to a company statement.
Based on the initial share price, Waystar boasts a market capitalization of roughly $3.5 billion. When factoring in debt, the company’s enterprise value climbs to around $5 billion. While the stock opened at $21, slightly below the IPO price, it ultimately closed the day down over 3% on its Nasdaq debut.
Waystar’s core business revolves around offering healthcare payment and revenue cycle management tools. They cater to a vast network of over 30,000 customers, encompassing roughly 1 million distinct healthcare providers. According to the company’s filing with the U.S. Securities and Exchange Commission (SEC), Waystar facilitated a staggering $5 billion in healthcare payment transactions last year.
The company itself was formed in 2017 through the merger of two revenue cycle management companies, Navicure and ZirMed. Renamed Waystar in 2018, the company emphasizes its mission-critical cloud software solutions that streamline healthcare payments in its S-1 filing with the SEC. Their technology assists healthcare organizations with managing tasks like claims submissions, payer remittances, and prior authorizations.
Waystar received a significant boost in 2019 when Swedish investment firm EQT Partners and the Canadian Pension Plan Investment Board acquired a majority stake, valuing the company at $2.7 billion. Bain Capital retained a minority stake after this acquisition. Media reports last year suggested Waystar was contemplating an IPO, which materialized with a public filing for a Nasdaq listing in October 2023.
Despite reporting a net loss of $51.3 million in 2023 on revenue of $791 million (compared to a similar net loss of $51.5 million on $705 million in revenue for 2022), Waystar remains optimistic about its future. The company leverages a combination of internally developed artificial intelligence (AI) and proprietary algorithms to automate payment workflows and continuously improve efficiencies. Their technology aims to enhance claim and billing accuracy, enrich data integrity, and ultimately reduce labor costs for providers.
“Put simply, our software helps providers get paid faster, accurately, and more efficiently, while ensuring patients receive a modern, transparent, and consumer-friendly financial experience,” Waystar stated in its S-1 filing.
In a testament to their commitment to innovation, Waystar announced a partnership with Google Cloud in May 2024 to explore the use of generative AI technology for revenue cycle applications. One successful use case involved automating the extraction of prior authorization requirements from complex payer data sets. This collaboration reportedly reduced the time needed to generate pre-authorization reports by a staggering 99.93% while simultaneously improving accuracy by 13%. Waystar executives have emphasized continued investment in cutting-edge technologies like generative AI.
Looking back, 2019 marked a period of active acquisitions for Waystar. The company bolstered its offerings by acquiring several analytics solutions providers, including Connance, Ovation Revenue Cycle Services’ transaction services technology, PARO, and Digitize.AI (a company specializing in applying AI to the prior authorization process). Notably, when competitor Change Healthcare was crippled by a cyberattack in February 2024, Waystar stepped up by offering a temporary program that granted providers expedited access to revenue cycle management software to maintain cash flow.
Waystar’s successful IPO signifies a potential turning point for the healthcare tech IPO market. The past three years witnessed a significant slowdown due to the macroeconomic climate. There were 20 digital health companies that went public in 2021, followed by a stark drop to only two companies (including prescription digital medicine company Akili) in 2022. The year 2023 saw no digital health IPOs at all.
However, 2024 has painted a different picture with a renewed wave of healthcare and health tech IPO activity. Last week, Tempus AI filed for an IPO. The company is looking to raise up to $400 million in a public offering, according to some reports. BrightSpring Health also plans to raise approximately $960 million in an IPO that would value the company at about $3 billion. The provider of home and community-based healthcare services announced plans to sell 53.3 million shares of its common stock, priced between $15 and $18 each, aiming to raise between $800 million and $960 million.
Waystar’s offering was led by JPMorgan Chase & Co., Goldman Sachs Group Inc., and Barclays PLC.
