NEW YORK (The Deal) -- Investors in private equity-backed Paycom Software (PAYC) are banking on continued revenue growth as the payroll software provider tries to figure out how to comply with a waived debt covenant and how to improve its lackluster stock performance after a disappointing initial public offering.
Paycom sold 6.65 million shares on April 14 priced at $15 each, which was below the expected $18 to $20. The IPO raised about $99.68 million.
Things have only worsened on the stock front, too, closing Tuesday at $12.62, down almost 16% from its debut price.
Paycom has a waiver on the current debt-to-Ebitda covenant attached to its bank loans, which mandate a ratio of less than 1.5 to 1 times, through April 30. Paycom was not in compliance with that covenant as of March 31.
The relevant loans are an $11.86 million secured term note due Dec. 15, 2018, bearing interest at 5% and a $13.52 million construction loan that will be converted to long-term notes when the related construction project is completed, bearing interest at the Wall Street Journal U.S. Prime rate plus 50 basis points, with a minimum rate of 4%. The lender on those loans is Edmond, Okla.-based Kirkpatrick Bank.
When it comes to Paycom's growth outlook, analysts thus far are more optimistic than investors.
The IPO was underwritten by Barclays Capital Inc., J.P. Morgan Securities LLC, Pacific Crest Securities LLC, Canaccord Genuity Inc., and Stifel, Nicolaus & Co.
All five underwriters initiated research coverage on Paycom in May after the expiration of a mandated quiet period on research from underwriters.