British cyber security group Darktrace plans London IPO

Listing will be the first flotation on the London Stock Exchange since Deliveroo flop

WASHINGTON, DC - FEB 06: The Darktrace cybersecurity software demonstration showed how a global problem (instrusion) can start with just one employee's work station. Jim Penrose is a former NSA employee who is now part of Darktrace, a cybersecurity software company that is opening up an office in Washington, D.C. (Photo by Michael S. Williamson/The Washington Post via Getty Images

British cybersecurity company Darktrace said it plans to float on the London Stock Exchange on Monday, a boost for the City just weeks after Deliveroo's disastrous debut.

The company’s initial public offering will see it list on the LSE’s main market in what chief executive Poppy Gustafsson described as a “major milestone” for Darktrace and a “historic day for the UK's thriving technology sector”.

“Developed by our talented software engineering teams in Cambridge, our artificial intelligence was the first on the market to be deployed at-scale in the enterprise, and today is responsible for protecting over 4,700 organisations worldwide from the most sophisticated cyber-threats,” Ms Gustafsson said in a statement on Monday.

Darktrace, which uses AI to detect and respond to cyber threats, is expected to value the company at about $3 billion to $4bn, making Ms Gustafsson's stake worth about £20 million ($27.42m)

The company and its shareholders plan to sell at least 20 per cent of the company’s equity, the company said, and the stock will trade on the LSE’s premium market, making it eligible for FTSE’s benchmark stock indexes.

The flotation comes almost two weeks after Deliveroo's disastrous debut on the LSE, when shares fell by 26 per cent on the first day of trading at the end of last month. On Monday, the share price was £251.90, 1 per cent down at 11.13am.

The flop IPO raised fears for the future of tech listings in London, something the British government is keen to attract post-Brexit.

Ms Gutafsson said Darktrace “is a very different technology company” to Deliveroo.

“I love Deliveroo … but this is different,” she said in an interview.

LONDON, ENGLAND - DECEMBER 05: Co-Founder and CEO of Darktrace Poppy Gustafsson (L) attends a Q&A with TechCrunch Moderator Natasha Lomas (R) during day 1 of TechCrunch Disrupt London at the Copper Box on December 5, 2016 in London, England.   John Phillips/Getty Images for TechCrunch/AFP (Photo by John Phillips / GETTY IMAGES NORTH AMERICA / Getty Images via AFP)

Unlike Deliveroo, Darktrace's listing will not offer a dual-class structure, something that scared off major UK fund mangers in the run-up to the food delivery company's IPO, and will instead be a more traditional listing.

The company said it will sell new shares to fund product development, strengthen its balance sheet and add to its 1,500 employees, with a particular focus on its research and development centre in Cambridge.

Created by a team of mathematicians and cybersecurity experts, Darkface said it is tapping a market worth about $40bn.

The company's revenue rose to $199.1m from $79.4m between its 2020 and 2018 fiscal years, an annual growth rate 58.3 per cent.

Core earnings improved to a profit of $9m from a $27m loss over the same period, boosted by falling travel costs amid government travel restrictions during the pandemic, while the group's customers rose 52 per cent to 3,858 from 1,659.

IPO proceeds in London total $9.9bn this year, according to Bloomberg, on track with 2019 and nearing the 2020 total of $11.6bn.

Darktrace received early funding and advice from British entrepreneur and multimillionaire Mike Lynch’s Invoke Capital, the founder of Autonomy, who is currently fighting extradition to the US over his company's more-than $10bn sale to Hewlett-Packard 10 years ago.

The businessman, who still sits on Darktrace’s science and technology committee, is accused, along with his chief financial officer, of orchestrating an accounting fraud to make Autonomy more attractive in the sale. Both men have denied the charge.

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