There’s been little to write about in the IPO Playbook so far this year. But there’s good news — that should change soon with the first tech IPO of the year, SecureWorks (SCWX).
According to the Wall Street Journal, the company is gearing up for a roadshow next week. This means a SecureWorks deal is likely to come to market around April 20th to 22nd or so.
The lead underwriters include the who’s who of Wall Street, such as Bank of America Corp (BAC), Morgan Stanley (MS), Goldman Sachs Group Inc (GS) and JP Morgan Chase & Co. (JPM), among several others. The proposed ticker for SecureWorks is SCWX and the listing is planned for the Nasdaq exchange.
As the name implies, SecureWorks is a top operator in the fast-growing cybersecurity space. Something else: the company is owned by Dell, which shelled out $612 million for the company back in early 2011.
Since then, the Dell SecureWorks operation has bulked up. The company now counts over 4,200 clients in 59 countries and has an extensive portfolio of products, helping companies prevent breaches and malicious activities.
SecureWorks is actually for companies of any size. Then again, it helps that the technology can work in different types of environments, whether on-premise, in the cloud or a hybrid of the two. The company has also been investing heavily in protecting mobile communications.
A key for SCWX is its Counter Threat Platform. Every day, it processes as much as 160 billion events, using sophisticated algorithms to root out potential threats and to come up with the right actions to take.
SecureWorks sports some robust financials. From fiscal 2014 to 2016, the revenues jumped from $205.8 million to $339.5 million. However, the company has continued to lose money, with SCWX posting a $72.4 million net loss in fiscal 2016.
Yet the growth opportunities still remain strong. For example, Gartner forecasts that enterprise security and services IT spending will ramp up to about $101 billion worldwide by 2018.
Let’s face it, cyber attacks continue to be a huge problem, especially as the threats get more severe. Increasingly, the bad actors include nation states and sophisticated criminal organizations.
Besides, there is likely to be interest in mergers and acquisitions from the top operators in tech. Already companies like International Business Machines Corp. (IBM), Cisco Systems, Inc. (CSCO) and Microsoft Corporation (MSFT) have pulled off acquisitions.
But there are some other factors to keep in mind regarding the Dell SecureWorks offering. First of all, there will probably be a heavy appetite for IPOs since there has been a prolonged dry spell of dealmaking. Oh, and based on the report from the Wall Street Journal, it also appears that the underwriters of SCWX will issue a relatively small amount of stock (less than 8% of the market value) at an attractive valuation, which should provide fuel for even more demand.
In other words, the IPO should get off to a nice start. And yes, this will likely provide a much-needed boost to get the market back into gear again.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
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