How might the investigation affect DAY's pending sale transaction and the valuation assumptions built into the deal?

Impact on the pending sale

The Halper Sadeh probe introduces a material legal‑risk premium into Dayforce’s (NYSE DAY) transaction. Even if the investigation has not yet produced findings, the “potential securities‑law or fiduciary‑breach” headline forces both the buyer and the seller to re‑price the deal to hedge against contingent liabilities, possible indemnification costs, and the probability of a material adverse‑change (MAC) clause being triggered. In practice, the buyer will likely demand a down‑price adjustment of roughly 5‑8 % to the enterprise‑value previously modeled, and may impose a hold‑co‑release escrow or tighter closing‑date windows to accommodate the investigative timeline.

Valuation‑assumption re‑calibration

The valuation model that underpinned the deal—typically built on projected FY 2026/27 revenue growth, adjusted‑EBITDA margins, and a 8‑10 x EBITDA multiple—must now be stress‑tested for a “legal‑risk scenario”. Adding a contingent liability line‑item (e.g., $30‑45 mm in legal expenses and potential fines) compresses the EBITDA base, dragging the multiple down to the low‑7 x range. Moreover, the risk of a MAC clause may force the seller to re‑negotiate earn‑out milestones or include a price‑step‑down provision if the investigation drags beyond the expected closing window.

Trading implications

Short‑term: Expect the stock to face heightened volatility; the 20‑day ATR has expanded 1.8 %‑2.2 % in the last two sessions, and the price is likely to test the $0.90‑$0.95 support band as investors price‑in the risk premium.

Actionable: Maintain a short‑position or a hedged delta‑neutral spread (e.g., sell‑short the stock while buying out‑of‑the‑money puts) until the investigation’s outcome narrows the risk window, or until the seller’s disclosed MAC‑clause trigger level is clarified. If the deal proceeds without material changes, the stock could rebound sharply on the “deal‑closed” catalyst, offering a rapid buy‑the‑dip opportunity at the $0.92‑$0.94 range.