Workday, Inc. Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K, dated June 18, 2013 (with closing on June 24, 2013), details the issuance of additional convertible senior notes by Workday, Inc. The filing reports on the exercise of an option by initial purchasers to acquire additional debt securities following an initial offering on June 17, 2013.
Key Financial Metrics and Transaction Details
- Debt Issuance: Workday issued an additional $40 million in 0.75% Convertible Senior Notes due 2018 and $30 million in 1.50% Convertible Senior Notes due 2020.
- Total Principal: $70 million aggregate principal amount for the additional notes.
- Net Proceeds: Approximately $68.3 million received after deducting discounts and including accrued interest.
- Hedge Costs: Approximately $3.2 million used for 2018 note hedges and $3.0 million for 2020 note hedges, partially offset by warrant proceeds.
- Underwriters: Morgan Stanley & Co. LLC, Goldman, Sachs & Co., and Barclays Capital Inc.
Material Changes and Related Transactions
The filing represents an expansion of the June 17, 2013 offering. In connection with the additional notes, Workday entered into separate hedging and warrant transactions:
- Convertible Note Hedge Transactions: Workday purchased options covering 480,300 shares (2018 Notes) and 367,020 shares (2020 Notes) to reduce potential dilution upon conversion.
- Warrant Transactions: Workday sold warrants to the counterparties to acquire up to 480,300 shares (2018) and 367,020 shares (2020) at a strike price of approximately $107.96 per share.
- Dilution Risk: The filing notes that if the market value of Class A Common Stock exceeds the warrant strike price, the warrants will have a dilutive effect on earnings per share.
Guidance, Risks, and Contingencies
The filing does not provide updated financial guidance or management commentary on future performance. Key risks and contingencies identified include:
- Unregistered Securities: The additional notes, purchased options, and warrants were sold in private placements relying on exemptions from registration (Section 4(2) and Rule 144A).
- Separate Transactions: The hedge transactions and warrants are separate from the notes; holders of the notes have no rights regarding these instruments.
- Expiration: The 2018 warrants expire in 2018, and the 2020 warrants expire in 2020.
Investor Verification Checklist
- Verify the total outstanding principal of the 2018 and 2020 Convertible Senior Notes including the initial and additional issuances.
- Confirm the current market price of Workday Class A Common Stock relative to the $107.96 warrant strike price to assess immediate dilution risk.
- Review the June 17, 2013 Form 8-K for the full terms of the initial notes and indentures.
- Monitor the impact of the $6.2 million in hedge costs on the company's cash flow and net proceeds utilization.