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Why Workiva Stock Fell Today

By Evan Niu, CFA - Aug 14, 2019 at 3:57PM

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The company priced two offerings, with one representing insider selling activity while the other has dilutive potential.

What happened

Shares of Workiva (WK -0.03%) have fallen today, down by 9% as of 3:15 p.m. EDT, after the company priced two separate offerings. The drop comes amid a broad-based market sell-off. Workiva stock is actually up significantly year to date.

So what

The company had earlier this week announced a secondary offering by selling stockholders, as well as a private offering of convertible senior notes.

Red chart going down

Image source: Getty Images.

The secondary offering was a public deal that saw existing shareholders selling nearly 1.3 million shares at a price of $56.25. The selling stockholders include CEO Martin Vanderploeg, CTO Jeff Trom, and CFO Stuart Miller, among other C-suite executives, according to the prospectus for the deal. The underwriters have a 30-day option to purchase up to 193,000 additional shares from the shareholders, and Workiva is not receiving any of the proceeds.

The $300 million convertible note offering priced at an interest rate of 1.125% and matures in 2026. Each note has an initial conversion rate of 12.4756 shares, which translates into an initial conversion price of $80.16 per share, a 42.5% premium over where the secondary offering priced at. The enterprise data management company expects to receive about $292.1 million in net proceeds from the deal, which it plans to use "for working capital and other general corporate purposes."

Now what

The news comes after Workiva reported second-quarter earnings results last week that comfortably topped the company's guidance for Q2. Investors also cheered that Workiva even raised its full-year outlook, with revenue now forecast at $290 million to $291 million for the year.

Vanderploeg had also separately sold 25,000 shares on Monday, pursuant to a Rule 10b5-1 trading plan, for over $1.5 million. All of the insider selling activity, combined with potential dilutive effects of the convertible note offering, seems to be hurting investor confidence. It does not appear that Workiva is hedging its converts to minimize potential dilution, a somewhat common practice.

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