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Short of the Month

I am starting a new series that I am calling “Short of the Month”. The goal is to pick out a publicly traded company every month that I believe is a good candidate to sell short or at least warn investors before they think about investing in that company. I believe there are just too many articles on the internet about what stocks to buy and it seems that rarely some one advices their readers against buying a particular security.

The article format will consist of a brief introduction to the company and a list of reasons why I am not particularly fond of the company.

This month’s short will be Workday (WDAY). I had the luck of talking to several engineers and managers currently working at the company and I was able to gain information that is not available in any of the company’s public filings or other sources. Let’s jump right into why I stay away from Workday.

  • Did not make a single profit since it was founded 15 years ago.
  • Management puts a large emphasis on Non-GAAP operating income.
  • Huge insider selling activity.
  • Workday’s proprietary technology stack — XpressO —makes it difficult to attract and retain good talent. Especially in the Bay Area where competition for tech talent is fierce.
  • XpressO does not adapt with the rapid change in technology and migration is almost impossible.
  • Workday has a dual-class share structure that deprives shareholders of their voting rights. This non-shareholder friendly structure is an indicator that the company does not operate in the interest of its shareholders.
  • 97% customer satisfaction does not really include ex-customers who ended their subscription with Workday because the system was not able to meet their needs. That is, if out of 1000 customers only 100 ended up staying with Workday and out of those 100 remaining customers 97 are satisfied it counts as 97% customer satisfaction as the 900 ex-customers are no longer considered customers.
  • User experience seems to be outdated and not pleasant and users end up avoiding to use Workday.
  • High short ratio (3.62 as of Jul 14, 2020) compared to competitor Oracle (1.93).

I understand that a number of readers might have a different opinion regarding some of the points above and that is fine. This is a list of items that bother me with this particular company. I avoid investing in companies that display the above weak points and it saved me a lot of headache a few times. I do think there are safer and better investments out there and I don’t need to chase this one.

Feel free to leave a comment and I will make sure to read it.

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