ShiftPixy Inc. will add a new app and new markets after a June 30 initial public offering sold 7% of the Irvine-based food-service temp agency to the public for $12 million.
It offered shares in a range of $6 to $8, opened at $6.40, and traded last Thursday at about $10.60 a share—up 63% in two weeks and good for a $302 million market cap.
It was at least the sixth Orange County-based IPO this year.
W.R. Hambrecht & Co. in San Francisco underwrote it.
Co-founders Scott Absher and Stephen Holmes each retained 44% of ShiftPixy after the offering, while independent director Kenneth Weaver and Chief Financial Officer Stephen DeSantis hold tiny stakes, Securities and Exchange Commission filings show.
Absher and Holmes raised about $3 million as a startup and launched ShiftPixy in June 2015.
ShiftPixy puts workers in restaurants, catering and hospitality food service; offers payroll services to firms that retain their people; and is building an app to let workers accept shifts at multiple client sites—“tech-ing” the temp industry and giving part-timers a shot at full-time hours.
Team Work
Weaver held senior executive roles with Japan-based tire maker Bridgestone Corp. and consults to TVV Capital, a Nashville-based private equity firm. DeSantis was CFO for Predixion Software Inc. in Aliso Viejo, which was bought in February by Irvine-based Greenwave Systems Inc.
Absher said he and Holmes “should’ve known each other earlier,” having worked in overlapping business areas for about 25 years. Absher advised firms “on insurance and capital formation,” while Holmes co-owned a company that outsourced human resource tasks for businesses.
“We were both kind of geeky about co-employment,” Absher said. “We’re both skilled [at building] programs—what we should be offering, what it should cost.”
He said industry gaps and changes—companies unable to secure workers compensation coverage, and high turnover rates coupled with trends toward part-time labor—and professional relationships supported a launch of their own effort.
Grade A+
ShiftPixy went public under a program that lets companies raise money faster.
Under a 2012 federal law and SEC rules finalized in 2015, firms can raise up to $50 million in debt or equity in a streamlined process that superseded 80-year-old rules that capped firms’ access at just $5 million.
The result is fewer financial and legal hurdles while retaining regulatory oversight and producing faster moves to market and, if companies list on a national exchange, the same access to brokers, dealers and institutional investors as larger transactions.
ShiftPixy is on the NASDAQ.
Reg A+ is “great for early-stage companies, for pre-revenue companies,” Absher said.
For the year ended Aug. 31, ShiftPixy had about $50.7 million in gross billings and $8.5 million in net revenue. It showed gross profit of $1.5 million and a net loss of about $1.9 million.
Shifting Gears
The company employs “shifters”—part-time food service workers—at caterers, restaurateurs and small franchisees of large chains, mostly in Southern California.
About a third of the $11.3 million in proceeds is for business development, new offices and working capital.
New York is scheduled to open in August, and groundwork for Orlando follows in September, Absher said.
Filings say the next four cities—“upon securing additional financing, if necessary”—are Dallas, Chicago, Las Vegas and Atlanta. All have restaurant numbers for large local populations and plenty of business and tourist travel.
As of April 30, ShiftPixy had about 2,900 workers at 94 clients and another 800 of 25 other companies, for which it provided payroll services.
It employs 42 in OC.
Application Process
Much of the remaining money will finish ShiftPixy’s smartphone app and infrastructure.
The app offloads some of temping’s traditional overhead and headaches to technology. Work formerly done in-house and by phone—how ShiftPixy’s work is done now—moves to the app.
Absher plans a rollout in August and September.
Only the company, its clients and its workers have access.
Workers apply for a job and get verified with “about 150 data points” of checking and overlap on the app.
Shifts are posted and filled on the app—“you can’t just call in sick; you have to use the app,” Absher said.
Future iterations of the app could see profiles like LinkedIn, and ratings of employers and employees, as on Yelp.
A monthly fee of $5 to $10 for shifters is being considered. Absher said it would attract dedicated workers and that a person who took more shifts could reduce or avoid the fee.
“You don’t want people to be stagnant; you want them to be active,” he said.
A main feature of the app is “intermediation”—where workers can take shifts at multiple locations and for different clients, as a way to build full-time schedules from part-time work, with ShiftPixy, as with traditional temp agencies, offering benefits.
Bugs
There have been snags.
Holmes was a ShiftPixy officer and director but resigned in July 2015; company filings disclosed convictions for “acts related to making false statements” on two quarterly IRS payroll tax filings in the late 1990s.
“The business had short-paid,” Absher said. “It became a weapon in the hands of an angry ex-partner … and it resulted in the felony.”
Filings say Holmes is an independent contractor building the temp agency’s sales network, consulting on worker’s comp and health insurance and “not involved in any part of [ShiftPixy’s] accounting or tax paying and IRS return filing,”
Absher in 2013 was told by the Alabama Securities Commission to stop selling securities in the state, an order stemming from his involvement with a firm based there.
Absher said he’d considered buying the company, “concluded the business was too messy and moved on,” but investors named him in a securities commission filing as part of a complaint against the owner.
The state “asked me to stop talking about investments … which I had not (done), so there was no reason to respond.”
Then there’s the IPO.
ShiftPixy filed documents in September but decided in December to withdraw the filing because a company audit was incomplete.
Filings show the board in January fired Salt Lake City-based Pritchett Siler & Hardy PC and replaced it with Squar Milner LLP in Newport Beach.
Its second filing came on April 3, and the IPO followed in June.
