Salary.com raises $60m amid rising tide of IPOs

Testing the long-stagnant market for initial public offerings, Salary.com, a compensation software and consulting firm in Waltham, is set to commence trading on the Nasdaq stock exchange today.

The fast-growing but unprofitable company helps businesses and individuals calculate pay packages. Salary.com issued 5.7 million shares for $10.50 per share yesterday, raising nearly $60 million, and will debut as a public company this morning under the symbol SLRY.

Its stock sale comes at a time of stepped-up IPO activity, which is being closely watched by high-tech start-ups and venture capitalists as an indicator of the health of the entrepreneurial sector. Last week, a dozen IPOs across the nation raised $3.4 billion, marking the busiest week for stock offerings since late last May, according to the Thomson Financial research firm in New York.

More than 90 other companies have filed IPO registration statements with the Securities and Exchange Commission, including six in Massachusetts. Just yesterday, medical device company Insulet Corp. of Bedford registered to raise $86.2 million. EnerNOC Inc., a Boston company that helps businesses manage energy consumption, registered Tuesday to sell up to $100 million in stock. Last week, TechTarget Inc. of Needham, an online technology publisher, registered to raise up to $75 million.

Richard J. Peterson , senior researcher for Thomson Financial, predicted the number of US offerings will range from 250 to 300 this year, making it the strongest year for IPOs since 2000.

Salary.com, which has had 23 consecutive quarters of revenue growth, lost $4 million from its operations in the nine months ended Dec. 31, according to its filing with the SEC. The company's fiscal year ends March 31. Company officials declined to comment on its plans, citing an IPO quiet period imposed by securities regulators. But the company is clearly seeking to capitalize on a growing push by global businesses to attract and retain talented executives and managers.

Its largest revenue stream is selling software and consulting services that help large enterprises and small businesses with their compensation strategies, especially aligning pay with performance, said Jason Corsello , research director with the Yankee Group in Boston. Corsello said Salary.com has two other revenue streams: selling in-depth pay comparison information to consumers and selling ads that accompany less detailed free comparison data on its website.

Corsello said the threshold for "human capital management" companies to go public has been $50 million in annual sales and profitability. "Salary.com falls significantly below that," he noted. "It's going to be very interesting to see the market reception."

While stock offerings by companies without profits, or even revenue, were common during the technology boom of the late 1990s, most start-ups seeking to go public in the years after the dot-com bust early this decade waited until their companies earned money.

But more recently, companies have returned to selling shares on the promise of profitability, said Brian Hamilton , chief executive of Sageworks Inc., a financial firm in Raleigh, N.C.

"There's a favorable market now, and because of that companies are going out a little early," Hamilton said. "Salary.com falls into that category of companies that I believe represent riskier IPOs, because even as their revenue is growing I don't see them scaling with efficiency. I believe they're going out one to three years early."

For venture capitalists, however, an IPO revival would be welcome. The vast majority of recent "exits" by venture-backed companies have come through acquisitions, and a stronger IPO environment would give financiers another avenue for cashing out.

"The trend is real, and it's very positive," said Maria A. Cirino , general partner at .406 Ventures, a newly formed venture firm in Boston. "What's driving it? There's a ton of investable capital out there and too few places to put it where you can get a good return."

Robert Weisman can be reached at weisman@globe.com.