Darktrace stock collapses 30% after takeover talks end

Shares in U.K cybersecurity company Darktrace

dipped over 30% on Thursday morning after talks with U.S. private equity firm Thoma Bravo fell through.

Early London trading saw Darktrace’s stock hit lows of 352.83 pence per share after it said that an agreement with Thoma Bravo “could not be reached on the terms of a firm offer”.

Darktrace had been in discussions with the PE firm in August over a possible cash offer for its entire current and future issued share capital.

In Darktrace’s financial results posted on Thursday, the firm said that the cash offer has now been “terminated.” Thoma Bravo said it had not made an offer but reserved the option to make a bid in the next six months.

The share price drop was well below the troughs of its post-IPO peaks last year, where shares climbed to 358 pence per share, a 43% increase from its IPO pricing of 250 pence.

Michael Hewson, chief market analyst at CMC Markets UK, said that the share drop means the debate will continue about Darktrace’s business model.

“With the shares already well below their post IPO peaks of last year there is a sizeable split amongst investors as to whether the company can live up to expectations,” he said in a market commentary note on Thursday.

In its fiscal year to June 30 results, Darktrace swung to a profit of $1.46 million after losing $145.8 million the prior year.

It reported a rise in revenue to $415.5 million compared with $285.1 million in 2021. It also said that $3.8 million in revenue it had been recognizing in 2022 was related to prior periods.

Darktrace said it was reiterating its guidance from July for annual recurring revenue, seeing net constant currency growth between 4% and 14%.

Hewson praised the firm’s efforts in its sector, especially in the backdrop of the war in Ukraine, but caveated it with concerns of the dark clouds surrounding the firm, referring to an upcoming U.K court case involving Darktrace’s founder Mike Lynch.

The High Court will determine whether he can be extradited to the U.S to face charges of fraud over the sale of tech firm Autonomy to Hewlett-Packard

Hewson said: “[…] there are questions about its links with Autonomy owner Mike Lynch with some investors questioning how deep these links go.”

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