Darktrace shares continue to fall as investor lock-up period comes close to an end
The firm's shares plunged as much as 27 per cent last week after an analyst note the firm was worth only half its last closing value of £6.6 billion
Cambridge-based cybersecurity firm Darktrace has suffered a second share crash in just over a week, as the end of an investor lock-up period approached.
On Monday, the artificial intelligence-focused firm closed down 121p at 698p, with a drop of more than 15 per cent that valued Darktrace at £4.7bn, according to The Guardian.
Share plummeted in anticipation of insiders including Mike Lynch, the ex-CEO of Autonomy, as well as other major investors such as Summit Partners and KKR, being freed to sell their holdings when a 180-day lock-up expires on Wednesday.
The firm's employees will have to wait a year after the float to sell their holdings.
Darktrace had previously warned that the end of the lock-up period could send its shares lower.
Last week, the firm's shares plunged as much as 27 per cent after an analyst note from London brokerage Peel Hunt claimed that there was a 'disconnect' between Darktrace valuation and revenue opportunities and that the firm was worth only half its last closing value of £6.6 billion.
The note further claimed that many of Darktrace customers had described its technology as 'snake oil'.
Peel Hunt analysts worry that the company spends just 10 per cent of its sales on research, about half the level of bigger peers like CrowdStrike.
"Speaking with its customers, it appears Darktrace's strong marketing engine has been a cause of some controversy, as many felt there was a gap between the promise and reality," the analysts 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 per cent downside."
Darktrace floated on the London market at 250p in April, and had been a star performer since then until the share drop last week.
In recent weeks, the company's shares even came close to touching the highs of around 1,000p valuing the business at nearly £7bn.
Founded in Cambridge in 2013, Darktrace states that it is "a pioneer of autonomous response technology," which helps clients neutralise cyber threats across diverse digital estates, including the cloud and networks, Internet of Things (IoT) and industrial control systems.
It is based in Cambridge and is run by Poppy Gustafsson.
Darktrace has had a rocky journey towards its IPO.
In February, it emerged that UBS had pulled out of backing Darktrace's IPO amid concerns about the role of billionaire tech entrepreneur Mike Lynch. Lynch was the first shareholder in Darktrace, and currently owns a stake (along with his wife Angela Bacares) worth about £760m.
Lynch stepped down from Darktrace's board in 2018, and faces charges of conspiracy, securities fraud and wire fraud related to the sale of his company Autonomy to Hewlett Packard in $11.1 billion (about £8.06 billion) deal in 2011.
He is currently fighting extradition to the US.