Image may be NSFW.
Clik here to view.
Workday’s IPO ended up being priced at $28 per share, coming home slightly above the recently raised range of $24 to $26. That means it has raised $637m, valuing the company at c$4.5bn. That is an huge valuation for a company that has c350 customers on its books (mostly large enterprises), has never made an profit and is not talking about moving into the black any time soon, indeed the level of losses are rising as it invests further in development and sales.
But HR specialist Workday is a subscription-earning cloud pure-play and as is the case with this category of supplier, investors are buying into the perceived potential. Revenue rose 118% yoy for its last half year and bookings are on track to break $500m this year (see Workday IPO heads a stream of promising cloud pure-plays). It has taken customers like Flextronics International, Kimberly-Clark Group, Sun Life Financial and Lenovo Group from SAP and Oracle. Not too long ago, it secured a huge deal with Google, and just last week HP’s Meg Whitman revealed that HP will be deploying Workday on a global basis.
The Workday IPO brings Facebook’s IPO and subsequent share performance to mind (see Facebook shares slump and work backwards). It can easily be argued that Workday is overvalued given its current performance metrics but a key difference is that Workday provides a high volume core enterprise business application, the need for which is well established. Workday has more in common with Salesforce.com of course (see here and work backwards for a view on its performance) and the cloud applications and platform provider is maintaining its high valuation level despite a similar profile to Workday in terms of growth and losses. Let the trading in Workday shares begin.
