Oak Street Health will issue shares to the public under the ticker "OSH" and the reason the company is choosing now to IPO is precisely because we are in a pandemic, CEO Mike Pykosz told TheStreet.
The company plans to raise about $300 million by issuing 15.6 million shares at around $18 to $20 apiece. The valuation on the company is roughly $4.7 billion, so the company is offering about 6% of its equity.
Oak Street provides very low cost primary health centers, of which it has dozens around the U.S., to adults on medicare that may struggle to access primary care. The company, founded in 2012 and growing revenue recently at around 75% annually, seeks to provide the best value for care out of any provider and uses technology and application to create a streamlined experience and precise care for each patient. One example of care efficiency the company hopes to provide is by reducing hospitalizations.
The company's S-1 filling for its IPO said that the pandemic is a headwind to the business. Many are of course out of work, struggling financially and trying to avoid contracting coronavirus.
Here's what Pykosz said about why the company is raising money now:
"During COVID, obviously this is something that disproportionally impacts exactly the patients we serve. By going public now, we feel like we can continue to catalyze the company. This is just a step for us in a long-term journey to transform healthcare."
Of course, the company needs to raise money and isn't yet profitable, but Pykosz is pointing out that this segment of patients needs health solutions now more than ever.
Recently, the company has been running at a 2020 annual revenue stream of somewhere around $700 million. The company says it can capture a roughly $325 billion market for primary care in its cohort of patients and Pykosz does say that "it's going to be a while before we are a $300 billion company."
And while the current valuation does not reflect the company grabbing a huge slice of that market in the near-to-medium-term, it does reflect some degree of optimism. The valuation is in the ballpark of 6 times 2020 sales, a typical multiple for an early stage growth company. The company has been adding locations quickly and reaching its cohort in the time it has been in existence.
While the company hasn't turned a profit, its negative operating margin has moved in the direction of 0%.
Want to see more on the IPO market? See this piece on TheStreet: What Is a Special Purpose Acquisition Company, or SPAC?
Watch More Explainer Videos From TheStreet.com:
- What Is Trump’s Economic Plan and How Will it Impact Stocks?
- What Are Tailwinds Versus Headwinds?
- How Do You Know What a Private Company’s Finances Look Like?
- Why Do Companies Do Direct Listings?
- What is Day Trading and How Has it Impacted Stocks?
- What Are the Biggest Political Risks to Stocks?
- What is an 8K And How Do You Read One?
- What Is a 10K and How Do You Read One?