See updates below, including Workday’s closing stock price.
HR software vendor Workday went public Friday with its initial public offering, and it looks like the IPO exceeded just about all expectations.
The San Jose Mercury News reports that, “Shares of Workday soared about 70 percent higher Friday in the trading debut of the software company’s initial public offering, a successful launch for the biggest high-tech IPO since Facebook. … The Pleasanton, California-based successor to PeopleSoft sold nearly 28 million shares Thursday for $28 each — higher than the company had indicated just two days before. The IPO pumped at least $637 million into the company’s coffers and establishing an initial valuation of about $4.5 billion.”
Workday, which describes itself as a “leading provider of enterprise cloud applications for human resources and finance,” seems to be making the case that it is “emerging as a force to be reckoned with,” as one stock analyst put it. Friday’s stunningly successful IPO seems to be validating that viewpoint.
“An extreme amount of momentum”
As the Mercury News reported:
The stock debuted on the New York Stock Exchange at $48.05 Friday morning, slightly after 7 a.m. Pacific time, under the ticker symbol WDAY. In the first two hours of trading, the price stayed near the elevated debut level, trading in a range between $45.05 and $49.23 — 60.9 percent to 75.8 percent higher than the IPO price. …
Daniel Sweet, a partner at IPO Boutique, called the market debut a “spectacular pop.” He said in a telephone interview Friday that the shares were oversubscribed — demand exceeded supply — by up to 8 or 10 times, as “an extreme amount of momentum” took over the IPO.
The amount that Workday raised makes the company’s offering the largest IPO by a cloud computing firm — and the largest market debut by a tech company of any kind since Menlo Park social network Facebook’s IPO, analysts said.”
Workday picking up where PeopleSoft left off
As I wrote here Thursday, despite the comparisons, Workday’s IPO looks to be a lot more successful than Facebook’s a few months back. There are a number of reasons for that, but the big one is that founder Dave Duffield seems to have a great touch when it comes to launching HR technology companies. In fact, Workday seems to be picking up where his old company, PeopleSoft (which was acquired by Oracle), left off.
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Analyst Daniel Sweet seems to agree, telling the Mercury News:
The structure of this particular company would make them one of the worst nightmares for their competitors” such as Oracle, Sweet said.
(Workday) can frequently upgrade their software multiple times a year, keeping them ultracompetitive to these very bulky and very expensive systems” offered by larger competitors, which Sweet called “behemoths that have very structured, antiquated and slow-moving implementation processes.” …
Workday’s increasing revenues are the key to investor enthusiasm in the stock, despite the company’s inability to turn a profit. Overall revenues increased from $25.2 million to $68.1 million to $134.4 million in the past three full fiscal years. In the first six months of the 2012 fiscal year, that growth continued with revenues of $119.5 million, though losses totaled $47.3 million.
The revenue growth and possibility for more is strong enough to ignore the losses for now, Sweet explained.”
UPDATE No. 2: Workday (WDAY: NYSE) had a very good first day trading as a public company. The New York Times says that, “Workday, the software company, opened 72 percent above its offering price of $28 in its debut on Friday, on heavy trading volume. The stock closed the day at $48.69, up nearly 74 percent on its first day.”
UPDATE: The San Jose Mercury News also published a story about how the success of Workday is “a measure of vindication for co-CEO Dave Duffield.”
Duffield was forced to sell his previous company, PeopleSoft, to Oracle’s Larry Ellison in a bitter and highly unusual 2005 hostile takeover. Now, with enterprise software makers like Workday having revived an IPO market that fell into the doldrums after Facebook’s flop, the 85 million shares Duffield owns would be worth more than $2 billion at the top of the company’s proposed share price range.
It’s enough to make a 72-year-old chief executive all warm and fuzzy inside.”