What Happened?
Shares of human capital management software company Dayforce (NYSE: DAY) jumped 27.6% in the afternoon session after reports emerged that the company is in advanced talks to be acquired by private equity firm Thoma Bravo. The news, first reported by Bloomberg, suggests a deal to take the Minneapolis-based human resources software provider private could be announced within the next few weeks. While a sale price wasn't disclosed, some reports valued the potential transaction at over $9 billion. The rally sent Dayforce shares on track for their biggest-ever one-day gain since going public in April 2018, making the stock a top performer in the S&P 500 index.
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What Is The Market Telling Us
Dayforce’s shares are somewhat volatile and have had 11 moves greater than 5% over the last year. But moves this big are rare even for Dayforce and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 5 days ago when the stock gained 3.4% on the news that the SaaS sector continued to rally as favorable inflation data bolstered hopes for a Federal Reserve interest rate cut. This optimism was largely driven by a benign July Consumer Price Index (CPI) report, which solidified investor expectations for a Federal Reserve interest rate cut. Following the release of the inflation data, which showed a year-over-year increase of 2.7%, the probability of a rate cut in September surged to over 96%. Lower interest rates are typically beneficial for growth-oriented technology stocks, as they can reduce borrowing costs and increase the present value of future earnings. Adding to the positive sentiment was a 90-day delay in the imposition of higher tariffs on Chinese goods, which reduced trade-related uncertainty for the technology sector.
Dayforce is down 4.7% since the beginning of the year, and at $68.05 per share, it is trading 16.8% below its 52-week high of $81.80 from November 2024. Investors who bought $1,000 worth of Dayforce’s shares 5 years ago would now be looking at an investment worth $916.62.
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