Workday (NASDAQ: WDAY) had its best day since 2016 last Thursday. Shares jumped nearly 18% (trading was halted multiple times along the way) after reported that private equity firm Silver Lake has spent recent months in talks to take the human resources and finance software maker private. The move lifted Workday's market value from about $43 billion to nearly $51 billion.
What nobody has reported is a price, or terms, or any assurance a deal gets done. Neither Workday nor Silver Lake immediately responded to CNBC's request for comment. And reported talks don't always turn into offers.
This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia.
Continue » So the exercise worth doing is valuing the business on its own -- as if no buyer ever shows up. Before the report, Workday was a stock the market had spent much of the year marking down. Concerns that artificial intelligence (AI) will upend the business model of seat-based software have weighed on the shares for months.
The company also changed leaders in February, when co-founder Aneel Bhusri returned as CEO, replacing Carl Eschenbach. And even after Thursday's jump, the stock remains about 17% below its 52-week high of $249.85. That context matters for handicapping the talks.
A private equity firm circling a company like this is a bet that the market's AI fears are overdone, and that the cash flows are durable enough to carry a leveraged deal. Even if no offer ever comes, the report says a deep-pocketed buyer has been in talks about a deal for months. The business under all this is slower than it was, and considerably more profitable.
Extract — continue reading at the source.
