8th Sep 2022 10:19
(Alliance News) - Darktrace shares plummeted on Thursday morning after the cyber security firm confirmed that private equity firm Thoma Bravo would not being going forward with an offer for the business.
Shares sank 31% at 353.00 pence on Thursday morning in London. Over the past year, the stock has fallen 52%.
Victoria Scholar, head of investment at interactive investor said: "The breakdown of deal talks comes as a serious disappointment for Darktrace, which could have been set to privatise and avoid the rest of this year's equity market volatility."
In August, Darktrace announced it was in early stages of discussions with the Chicago, Illinois-based firm on an unspecified possible cash offer.
Thoma Bravo had until Monday next week to make a firm offer or walk away. On Thursday, the company confirmed it would not make an offer.
Scholar suggested that it was "unlikely" for another international suitor to come to the table for Darktrace, given the recent slump for sterling.
"This means that today's full year results will likely get lost in the noise of this morning's announcement," said CMC Markets' Michael Hewson.
Separately on Thursday, Darktrace reported it swung to an annual profit and saw strong revenue growth across all geographies.
In the financial year that ended on June 30, the Cambridge-based company swung to a pretax profit of USD5.3 million from a loss of USD143.9 million the previous year.
Revenue jumped by 46% to USD415.5 million from USD285.1 million.
Darktrace said scale efficiencies created by its multi-year contract model were the main driver behind the improved revenue figure.
As a result of the strong performance, the company said it expects revenue growth between 30% and 33%, up from previous expectations of between 29% and 32%, for the new financial year.
interactive investor's Scholar said a series a series of major corporate clients, including AB inBev, had helped to boost the firm's top and bottom lines.
She added that the "underlying fundamentals" of Darktrace's business were "robust" due to strong demand amid a surge in cybersecurity threats this year.
"It was a robust print as expected from Darktrace... Although, perhaps trivial when compared with the Thoma Bravo withdrawal," commented Davy Research.
Hewson argued the fall also comes amid as debate around the company's business model.
"On the one hand it has been touted as an award-winning pioneer in the cyber-security space, a sector that is more important than ever in these testing times and the Russian invasion of Ukraine.
On the flip side there are questions about its links with Autonomy owner Mike Lynch with some investors questioning how deep these links go," he said.
Back in May, the Telegraph reported that Darktrace's strategy chief was part of a group of executives who helped to misrepresent the success of software company Autonomy, which was acquired by Hewlett-Packard in 2011.
Autonomy Co-Founder Mike Lynch was accused of deliberately overstating the value of his business before it was acquired by the American technology firm. Lynch also co-founded Darktrace.
The Telegraph said Darktrace Chief Strategy Officer Nicole Eagan had been named as "part of a clique" in a fraud ruling at the UK High Court.
Darktrace argued there was "no link" between the firm and the civil actions against Mike Lynch.
This wasn't the only area of concern for Darktrace, however. According to Hewson, there have also been questions about the amount of money the company spends on research and development.
Hewson said the R&D figure has been argued as "too low for such an important sector."
In financial 2022, R&D costs totalled GBP44.3 million, up 54% from GBP28.8 million the previous year. Though, the firm explained this was primarily driven by an increase in other operating costs, which grew 80% against the previous year.
By Heather Rydings; [email protected]
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