Workday Founder Duffield: $3.9 Billion Richer on the Stock, So Why the Small-Time Items?
Champagne is popping and congratulations and high-fives are being directed at Workday (WDAY) and co-founders David Duffield and Aneel Bhusri. Unlike the public relations nightmare that followed the Facebook (FB) stock offering, shares in the cloud-computing applications provider have almost doubled in value since its October 12th IPO – further enriching both men.
Both Duffield and Bhusri have had success building and selling software companies during the past twenty years, culminating in the January 2005 sale of PeopleSoft, the world’s second-largest application software company, to Oracle (ORCL) for $10.3 billion. As of September 2012, the 72-year old Duffield had an estimated net worth of $2.1 billion, ranking him 221 on The Forbes 400. At current values, his 44% stake (of the 160.3 million shares outstanding) in Workday has boosted his wealth by an additional $3.9 billion.
Wealth enough to bypass smaller sums? Not entirely, it seems. Financial documents filed during the regulatory review for the Workday IPO disclose:
• In June 2010, Workday entered into a lease agreement with Lake Tahoe Land Company, an equipment leasing business owned by David Duffield. The contract provides for equipment financing credit for purchases of information technology and related equipment for use in Workday’s business operations. To date, Workday has borrowings outstanding of $3.8 million (the percentage rate of the loan hasn’t been disclosed). Though not detailed, the wording of the documents also suggests that Workday is paying rent on space for unspecified office properties, too (lowned by Duffield?).
• In January 2009, Workday entered into a consulting agreement with Nevada Pacific Consulting that employs the latter company to “provide finance and administrative services to us on a part-time, as needed basis.” As of January 31, 2012, Workday had paid a total of $114,000 in consulting fees. The owner of Nevada Pacific – one David Duffield.
• Duffield’s son Michael works as a general manager on Education & Government projects at Workday. He must be doing an impressive job, seeing that his cash compensation (salary plus bonus) jumped 54% year-over-year to $573,000 in the fiscal year ending January 31, 2012.
• And, Amy Zeifang, Duffield’s daughter, serves on a “part-time basis” as a director of Corporate Giving, the philanthropic arm of Workday. Her salary wasn’t disclosed in any filings.
To be sure, Duffield has done some good with all this money. According to published reports, through his Duffield Family Foundation, he and his wife have donated more than $290 million to “Maddie’s Fund,” an animal welfare foundation named after his beloved schnauzer. Not exactly the Gates Foundation’s war against polio, but every man gets to give away his wealth as he sees fit.
Here’s a link to the YCharts take on the value of Workday stock.
If Duffield and Aneel Bhusri botch things, good luck in firing them, Workday shareholders. The equity structure of the IPO provided both men with Class B shares – 10 votes per one vote for every share of Class A stock. This capital structure voids any possibility of a hostile takeover, reflecting lessons learned in the losing battle fought a decade ago to keep PeopleSoft out of the clutches of Larry Ellison’s Oracle. Together, Duffield and Bhusri, control 67% of the voting power.
In total, holders of Class B stock control approximately 98% of the voting power of outstanding stock. The list of such stockholders includes Bhusri’s venture capital firm, Greylock Partners, current Workday executives and a board of directors with unflinching loyalty to Duffield (many of whom were lieutenants at the erstwhile PeopleSoft).
Substantially all of the 137.5 million shares of Class B shares were purchased or optioned at prices ranging from a few dollars to $13.75 a share. These shares will become available for sale on or around April 15, 2013 (subject to “lock-up” terms). Given their pre-existing net worth, it’s doubtful that Duffield or Bhusri (estimated wealth of about $2 billion) will look to flood the market with their shares.
David J. Phillips is a contributing editor at YCharts, which includes the just-released YCharts Pro Platinum for professional investors.