Darktrace Shares Dip Again As Investor Lockdown Ends | Business

Shares of cybersecurity firm Darktrace fell again after an analyst note raising doubts about its valuation and as the expiration looms a lock-up on insiders selling their stakes.

The Cambridge-based company, which had been a star since launching in April and entering the FTSE 100 last week, closed 121p to 698p on Monday, a drop of more than 15% which valued the company at 4.7 billion of pounds sterling.

Its shares began to dip last week after an analyst note from Peel Hunt questioned its sky-high valuation. The note raised a series of issues, including the fact that some customers of Darktrace, which uses artificial intelligence to create digital security products to keep businesses ahead of hackers and viruses, described its technology like “snake oil”.

The company, led by its co-founder Poppy Gustafsson, 39, lost around £ 2 billion from its market capitalization in a week.

Last month Gustafsson, a senior female executive in the male-dominated tech scene, attended a government event promoting investments in Britain held at Windsor Castle, where she was pictured meeting the queen.

The company’s shares had been close to 1,000 pence in recent weeks, valuing the company at nearly £ 7 billion, quadruple the 250 pence it started trading when it debuted on the London Stock Exchange. .

The latest drop in Darktrace’s stock price – the largest on the FTSE 100 – comes as the 180-day lockdown of investors who were on board during the IPO selling their shares ends on Wednesday.

Investors who could walk away from their stakes include British tech billionaire Mike Lynch, the first and largest shareholder of Darktrace, which sold software group Autonomy to Hewlett-Packard for £ 8.4bn in 2011.

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Lynch and his wife, Angela Bacares, own a 16.2% stake in Darktrace, worth around £ 780million, and are its second largest shareholders.

Lynch is appealing his extradition to the United States, where he is accused of fraudulently inflating Autonomy’s value before it was sold to HP, and is also awaiting judgment in a $ 5 billion civil fraud lawsuit brought by HP. He denies any wrongdoing in either case.

Last Monday, two days before Darktrace replaced Morrisons in the FTSE 100 after the supermarket chain was acquired by US private equity group CD&R, an analyst note titled Reality Check from city broker Peel Hunt reported wiped out more than a fifth of the company’s market capitalization. .

The note warned that there was a “disconnect” between the valuation of the company and its growth prospects.

“While we believe the high growth rates will continue, we are also seeing a disconnect between valuation and the ultimate income opportunity,” the note said.

“After taking into account the potential size of the market, the intensification of competition and the limited number of Darktraces [research and development] spend, we take an approach more based on our valuation, giving a target price of 473 pence.

Darktrace joins a series of companies that initially experienced a pandemic boom – including fashion firms Asos, Boohoo and The Hut Group, as well as grocery delivery firm Ocado and spread betting firm CMC Markets – to lose their luster with investors in recent months.

Darktrace, which has nearly 6,000 clients, said its revenue grew 50.8% year-on-year in the quarter to the end of September, significantly slower than the nearly quadrupling in share price the company had. benefited until last week.

Darktrace uses cutting-edge AI technology to protect nearly 6,000 customers worldwide, 1,500 of whom signed up last year, ”said a company spokesperson.

“This self-taught AI, who learns an organization’s digital footprint, advocates for all sectors of industry, from critical national infrastructures to global banks and businesses. Our AI technology interrupts a cyber threat every second, stopping attacks before they escalate into crises. “

The company was founded in 2013 by mathematicians from the University of Cambridge, artificial intelligence experts and cybersecurity specialists from GCHQ.

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