Workday announces 6M-share offering, shares -3% AH

Just seven months after selling $530M worth of convertible debt, Workday (WDAY) is selling 6M shares (current value of $510M) in a follow-on offering. Underwriters will have a 900K-share overallotment option. (PR)

The cloud HR/ERP software vendor says it will use the proceeds for "working capital and other general corporate purposes, including potential acquisitions of businesses, technologies, or other assets." Workday had $1.3B in cash/investments as of Oct. 31, and (thanks to its convertible debt sales) $478M in debt.

News of the offering comes on a day when Workday made new highs in morning trading, before later retreating.

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Comments (7)
  • Bulldog67
    , contributor
    Comments (2344) | Send Message
    No one said WDAY's management is dumb! The company is selling stock at the current sky high price (after 2 members of senior management sold $17 MM personally from early Dec. thru early Jan.). If the company thinks this is a good time to sell, maybe shareholders should also.


    Let's see: sell stock to provide funds for acquisitions to keep the "revenue growth game" going, so that analysts will continue to recommend, so that momentum buyers will continue to buy, so that management can line their pockets with stock grants and options.


    No sir, WDAY's management is not dumb. Now when we look back in a year or two, will we be able to say the same about the shareholders buying at these prices?
    14 Jan 2014, 09:43 AM Reply Like
  • CassandraSees
    , contributor
    Comments (711) | Send Message
    Perhaps a good strategy would be to wait for the stock sale and the subsequent drop in share price and then buy when it is at a lower level? - - Do you feel WDAY is a good long term buy or just a flash in the pan?
    14 Jan 2014, 12:13 PM Reply Like
  • Bulldog67
    , contributor
    Comments (2344) | Send Message
    Let's see, they have no earnings and their losses YOY actually increased in the 3rd quarter in spite of revenues increasing 76%. In addition, look at how much management is giving themselves in stock compensation. I'll save you having to do the work - in the most recent quarter, "share based compensation expense" was 15.4% or REVENUES!


    With losses continuing to increase (company touts that EPS losses were less, but that is only due to the much larger share base count), and showing no signs of improving in the near term, why would you take the risk of owning this stock. If and when the company ever shows a profit (several years down the road IMHO), that future profit will be so diluted with all the extra shares issued over the years. In fact if WDAY ever shows a profit, the stock will probably take a drive since one could then calculate a PE ratio.


    If one annualizes the last quarter's revenue, you would come up with $511,488,000. Then, not even counting the new shares, but based on the old share count times the current price of approx. $91.30, the stock is selling at over 31 times revenue! Anyone who buys this stock is not a investor, but rather a pure speculator. Any degree of basic analytics shows this company is being run to enrich management, not the ordinary shareholder. Does that answer your question as to "if WDAY is a good long term buy or just a flash in the pan?"?
    14 Jan 2014, 05:13 PM Reply Like
  • ironman7
    , contributor
    Comments (9) | Send Message
    Bulldog you are 100% correct on this stock.
    15 Jan 2014, 02:47 AM Reply Like
  • CassandraSees
    , contributor
    Comments (711) | Send Message
    Point taken - Thank-you - - - I was sort of equating the company on the level of ADP in terms of service to the customer
    15 Jan 2014, 11:11 AM Reply Like
  • Bulldog67
    , contributor
    Comments (2344) | Send Message


    You are welcome. Just want to make sure you understand, I agree that WDAY is a solid company that stresses service to their customers. I have never said they aren't a very solid company. However, just because a company is a great company, if it's stock is already priced to perfection, then that will not equate into a good long term investment!


    I fault management for overly stressing growth at the expense of earnings, and hyping "revenue growth" (just like CRM, but even more so). WS analysts keep regurgitating management's "revenue growth story" and ignore the tremendous growth in expenses that result in increasing bottom line losses. I also fault management for being overly generous with their stock grants, etc. to themselves.


    Sooner or later the Workdays and's will have to show earnings! Revenue growth without bringing anything to the "bottom line", is like in the late 90's when many stocks hyped "website hits" rather than earnings and cash flow. We know what happened to most of those companies.


    If you are a nimble trader, you may make some $$ in WDAY / CRM, but these stocks are IMHO priced way beyond perfection!
    15 Jan 2014, 02:25 PM Reply Like
  • foodforthought
    , contributor
    Comments (221) | Send Message


    ~255M shares O/S after the follow-on, not even counting the convertibles with conversion price of $83.28 (~4M shares) and $81.74 (~3M shares).


    So, WDAY's current market cap is ~$24B and trading at 31x 2014 revenue estimate of $765 (62% growth) and 21x 2015 revenue estimate of $1,150 (52% growth).


    WDAY is actually trading at a higher P/S valuation multiple than TWTR...!!!


    I think yesterday's and today's price action is short covering due to the price action that started on 1/7/14 with UBS raising price target to $100.
    16 Jan 2014, 10:17 PM Reply Like
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