SecureWorks is the 1st technology IPO . . .
Steve’s breakdown: . . . and with that, is receiving advertising funding to expand the SecureWorks market. BKV has done BtoB marketing for them but nothing recently.
ATLANTA, GA: SecureWorks is the first initial public stock offering of the technology industry this year. That may be the extent of the victory lap for the tech I.P.O. market, at least for now.
In its first day of trading on Friday, shares of SecureWorks, a digital security company, have been hovering near the $14 price it set the night before. The stock opened on the Nasdaq market at $13.89.
SecureWorks raised $112 million, selling eight million shares. It had been marketing nine million shares within the range of $15.50 to $17.50, indicating that demand was weaker than expected.
The lackluster demand is not that surprising.
For one thing, SecureWorks has little in common with so-called unicorns — those private, venture-backed start-ups with valuations above $1 billion that have been avoiding the public markets. SecureWorks is 17 years old, based in Georgia and owned by Dell.
And the ways in which SecureWorks does resemble some unicorns — top-line revenue growth, a history of losses and an enterprise-software business model — are not the most encouraging for investors.
Recent trading among already public security stocks did not help SecureWorks’ deal.
Shares of FireEye and Rapid7 declined in recent weeks as SecureWorks was meeting with potential buyers of its stock. Investors look to companies similar to the one going public when trying to determine what price they might be willing to pay for the I.P.O. When the so-called comparables slip, it can be a bad sign for the debutant.
For Dell, pricing below the range was not necessarily bad news. The computer maker, which has agreed to acquire EMC in the largest technology deal ever, is not selling shares in the offering.
Dell will own 86 percent of SecureWorks after the offering, and it is hoping the share price will rise in the public market. Dell will also control more than 98 percent of the voting power through a separate class of shares.
The I.P.O. price yields a valuation of $1.1 billion, which is almost double the roughly $600 million Dell paid for the company in 2011, according to Triton Research, which provides information on private companies.
SecureWorks said it might use the proceeds from the offering to develop new solutions or enhance current ones, and fund capital expenditures. Those funds may be necessary as competition in the security world increases.
The company said in the filing that it expected “pricing pressures within the information security market to intensify as a result of action by our larger competitors to reduce the prices of their security monitoring, detection and prevention products and managed security services.”
Still, the company has drawn quite a bit of revenue from its 4,200 customers. SecureWorks reported $339.5 million in total revenue for the year through Jan. 29, a 30 percent increase from the same period last year. SecureWorks had $72.4 million in losses for the year, almost twice as much as the same period in 2015.
Bank of America, Morgan Stanley, Goldman Sachs and JPMorgan Chase are managing the offering.