Darktrace Surges 32% After Rushing Smaller IPO to Market
(Bloomberg) -- Darktrace Plc soared on its first day of trading after the cybersecurity firm made the surprise decision to rush forward its IPO and cut its valuation by about half.
The shares jumped 32% to 330 pence in their first day of trading on Friday. The company raised 165.1 million pounds ($230 million), giving it a market value of about 1.7 billion pounds.
Darktrace’s IPO valuation was impacted by British entrepreneur Mike Lynch’s involvement, with investors demanding a discount, a person familiar with the matter said. Lynch, who was an early backer through his investment fund Invoke Capital Partners, is awaiting a verdict in a trial related to a $10 billion deal where he’s facing accusations of fraud. Private equity backers including KKR decided against selling stakes in the offering so they could take part in any upside in the share price, given the IPO priced at a discount, the person said.
When Darktrace announced its IPO earlier this month, it set May 5 as the start of trading and expected a valuation as high as $4 billion, a person familiar with the matter had said. A spokesperson for the company declined to comment beyond the IPO filings on Lynch’s impact on the listing or why the launch date was accelerated.
Lynch, the founder of Autonomy Corp., is facing charges relating to Autonomy’s more-than $10 billion sale to Hewlett-Packard Co. a decade ago. HP wrote down the vast majority of the deal in 2012 and has alleged that Lynch and his chief financial officer orchestrated an accounting fraud to make Autonomy more attractive in the sale, which both men have denied.
Those ties were listed as a potential risk to the company’s reputation and Darktrace warned investors that there was a small chance it could face charges related to hiring former Autonomy executives and taking funds from Invoke. A number of Darktrace’s executives have ties to Autonomy, including Chief Executive Officer Poppy Gustafsson.
Gustafsson and her team are also a rare example of a women-led technology company going public in London. Joining her on the c-suite are Chief Financial Officer Cathy Graham, Nicole Eagan, chief strategy officer and former co-CEO, and Chief Marketing Officer Emily Orton. PensionBee CEO Romina Savova took the pension-management platform public in London earlier this month.
“Darktrace is making a stealthy launch onto the stock market this morning, slinking into publicly listed status to access a new stream of investment,” Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said in a note. “As an expert in assessing threats to other firms, it comes as little surprise that the target price was scaled back from expectations, to lower the risk of a disappointing debut following the Deliveroo listing debacle.”
London is working hard to get more of its home-grown companies to sell shares in the U.K., as opposed to the U.S. which many tech founders say has a deeper pool of investors who understand their businesses. Darktrace marks the first major company to list in London after Deliveroo Holdings Plc’s disastrous debut, which saw the shares plunge more than 30%.
Caution Breaking Out
It indicates “a little bit of caution has broken out amongst London bankers after the shambles of the Deliveroo valuation,” said Michael Hewson, chief market analyst at CMC Markets.
Darktrace’s product learns the rhythms of how companies usually operate and uses this to detect anomalies that could indicate they’ve been hacked, a scammer has targeted an employee or that someone is stealing information. The company has said it plans to use the proceeds from the IPO to accelerate new product development, strengthen its balance sheet and improve financial flexibility.
Existing shareholders including management and employees sold 21.7 million pounds of stock in the IPO, less than half the original target. No board members or top executives cashed in any shares, according to terms seen by Bloomberg.
Jefferies International Ltd., Joh. Berenberg, Gossler & Co. KG and KKR Capital Markets Partners LLP arranged the sale, with Needham & Co. and Piper Sandler & Co. as joint bookrunners.
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