Darktrace’s shares jumped by as much as 44 per cent on its London Stock Exchange debut on Friday, after the initial public offering raised £165m for the cyber security company and its investors.
Cambridge-based Darktrace priced its initial public offering at 250p a share, giving it an opening value of £1.7bn, in the biggest new technology listing since Deliveroo’s flop a month ago.
Although that initial valuation had been about £1bn below Darktrace’s original target, its shares traded as high as 360p during its first day as a public company. Its shares closed at 330p, 32 per cent above its listing price, giving Darktrace a market capitalisation of about £2.2bn.
Although the move suggests that Darktrace and its investors could have raised more money if the deal had been priced more aggressively, it will help the London market to shake off the hangover left by Deliveroo’s embarrassing 26 per cent drop on its first day of trading a month ago.
It paves the way for Darktrace’s admission to the premium listing segment of the London Stock Exchange next week, helping it to build the “public profile” that was given in its prospectus as a primary reason for the IPO.
The listing was also designed in part to establish Darktrace’s independence from Mike Lynch, its founding investor through his investment group Invoke Capital, according to three people close to the company.
Lynch is fighting extradition to the US over charges of fraud related to Hewlett-Packard’s $11bn purchase of Autonomy, the software company he co-founded, in 2011.
Although Lynch has always denied any wrongdoing, Darktrace warned in its IPO filings of potential liabilities because of previous investments from the billionaire, whose family owns about 16 per cent of the company following the listing.
Despite Darktrace’s insistence that the Autonomy founder was no longer involved operationally in the business, investor concern over Lynch — rather than any lingering impact of Deliveroo’s disappointment — contributed to the decision to lower its prospective valuation ahead of Friday’s debut, according to the people close to the company.
Darktrace had originally hoped to achieve a value of up to £3bn, a person familiar with the plan said this month. This week it set a price range of 220p-280p, which set its valuation range between £1.6bn-£1.9bn.
In the months leading to its IPO, Darktrace made several changes to its boardroom, governance and shareholder structure to distance itself from Lynch, which people involved in the deal said was just as important to the company as the financial returns from going public.
Cambridge-based Darktrace will raise £143.4m gross proceeds from the deal, with existing shareholders selling shares worth only £21.7m. Around £25m more could be raised through an overallotment option if there is demand from investors but the proceeds are far smaller than Deliveroo’s offering, which raised £1bn for the food delivery company.
Darktrace uses artificial intelligence to spot intruders into a company’s network and other security threats. Its revenues grew 45 per cent in its most recent financial year to almost $200m, although it remains lossmaking.
“Our company is deeply rooted in the UK’s tradition of scientific and mathematic research so we are especially proud to be listing on the London Stock Exchange,” Poppy Gustafsson, Darktrace chief executive said. “This milestone marks an exciting day for Darktrace.”
In a statement on Friday, Gustafsson thanked Invoke, her previous employer, alongside other early investors including Talis Capital, Hoxton Ventures, Summit Partners, KKR and Vitruvian.
“We owe much gratitude to the Invoke team for their pivotal role in the vision, technology, positioning and operational input in the early years without which today’s success would not have been possible,” she said.
Jefferies, Berenberg and KKR Capital Markets are joint global co-ordinators for the float while Needham and Piper Sandler are acting as additional joint bookrunners.