Darktrace shares continue to fall sharply
By Abigail Townsend
Date: Monday 01 Nov 2021
(Sharecast News) - Shares in cybersecurity firm Darktrace fell heavily on Monday, compounding last week's sell off, as the end of an investor lock-up period approached.
Darktrace debuted on the London market at 250p in April, and went on to touch highs of around 1,000p before joining the FTSE 100 last month.
But its share price fell sharply last week after Peel Hunt - which has a 'sell' rating on the stock - argued there was a "disconnect" between the firm's valuation and revenue opportunities.
The broker noted: "Having considered the potential market size, the intensifying competition and Darktrace's limited R&D spend, we take a more grounded approach to our valuation, giving a target price of 473p. This implies a 50% downside."
The note prompted a sharp sell-off last week, but the approaching end of the 180-day lock-up period has maintained the pressure, and as at 1330 GMT on Monday, Darktrace was down 13% at 702.41p.
The loss-making firm was set up in 2013 by Autonomy founder Mike Lynch. Along with his wife Angela Bacares, Lynch retains a 15.98% stake and Lynch and Bacares - along with other major investors - will be free to start selling down their holdings from Wednesday.
Any major share sales could depress the stock price even further. According to The Telegraph, investors will be free to sell almost £3bn shares. Along with Lynch and Bacares, investors include partners at Invoke, Lynch's venture capital firm, who own around £380m shares, Summit Partners and private equity giant KKR.
At the time of floating, Darktrace acknowledged: "The market price of shares could be negatively affected by sales of substantial amounts of such shares in the public markets, including following the expiry of the lock-up period, of the perception that these sales could occur."
Lynch is currently fighting extradition to the US, where he faces fraud charges - all of which he denies - over the sale of Autonomy to Hewlett Packard in 2011.
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