This is great news, and an opportunity for London bankers to showcase it has the expertise to price an IPO correctly, as well as for the company's management to set expectations around the Darktrace IPO accordingly.
Darktrace IPO coming to London
Darktrace was founded in 2013, and uses Artificial Intelligence (AI) to identify cyber threats within client’s computer systems. The Darktrace IPO offers bankers a chance for redemption to price the listing correctly.
The company has over 4,700 clients and has seen a 45% increase in revenue year to date, with the US its biggest market, though the company’s HQ is in Cambridge.
Formula One fans will know of Darktrace due to its sponsorship of the McLaren team with its name having pride of place on the rear wing of the MCL35M.
Unlike Deliveroo, there are few concerns about the sustainability of its business model, however the company has as yet been unable to turn a profit. That in itself shouldn’t affect interest in the Darktrace IPO - successful businesses are rarely profitable straight out of the traps. However there is significant growth potential in the cybersecurity market.
Listing could set high value
According to the 12 April filing, from fiscal year 2018 to fiscal year 2020, the company said that group revenue has grown from $79.4m to $199.1m, with adjusted earnings improving from a loss of $27m to a $9m profit. Client growth over the same period has seen a rise from 1,659 to 3,858.
Expectations are for the company to issue £250m in new and existing shares, with the Darktrace IPO, which could come as soon as the end of this month, set to value the business at around £3bn. The shares would also be available for inclusion in the FTSE UK indices.
Potential issues remain
Another potential landmine is the legal problems around former Autonomy CEO Mike Lynch, who also happens to be one of the founders, through his Invoke Capital fund. Lynch is on trial for fraud as part of his involvement in the Hewlett-Packard Autonomy deal. Mr Lynch is also fighting extradition charges to the US over the same deal.
As part of the filing Darktrace warned that there was a small chance that it could also be charged with offences as part of any fallout, however management felt this was a remote prospect.
Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.