Darktrace soars on debut defying fears of a Deliveroo-style flop

CYBER security business Darktrace boasted a 32pc share price jump in its public market debut in London yesterday, dispelling fears that investors would sit out the listing after a disastrous flop for Deliveroo.

The company, which uses artificial intelligence to detect and prevent cyberattacks, priced its shares at 250p yesterday morning, giving the business a valuation of £1.7bn – far below a £3bn market cap that it initially planned. Strong interest in conditional trading of Darktrace shares sent that price up to 330p.

The surge suggests investor appetite remains strong for British tech businesses despite Deliveroo’s disappointing float in March.

The food delivery company’s share price crashed more than 25pc on its first day of trading.

In listing documents published yesterday, Darktrace warned investors that it could face money laundering investigations in both the UK and the US because of links to Invoke Capital, a fund created by Autonomy founder and former Darktrace director Mike Lynch.

Mr Lynch is awaiting judgment in a $5bn (£3.6bn) High Court trial over allegedly misleading software firm HP when it bought Autonomy, and is fighting extradition to the US on fraud charges. Mr Lynch has denied all wrongdoing.

The 55-year-old helped start Darktrace using his Invoke Capital fund and the company’s senior ranks include many former Autonomy employees.

Mr Lynch and his wife together own 18.5pc stake in Darktrace. Autonomy’s former finance chief Sushovan Hussain, who was convicted on fraud charges in the US, owns 2.8pc of the company.

Meanwhile, shares in Vaccitech, the spin-out firm behind the Oxford-astrazeneca jab tech, slumped by as much as a fifth as it made its debut in New York yesterday.

Vaccitech founders Professor Sarah Gilbert and Professor Adrian Hill had been in line for $17m fortunes but saw their paper wealth slip amid the sell-off.

No one saw that coming. How apt that cyber security firm Darktrace has caught unsuspecting doubters off guard with what looks like a successful stock market debut. Perhaps it’s a real technology company after all.

With the shares rocketing more than 40pc in early trading yesterday, it was easy to get carried away and declare this a resounding triumph after Deliveroo’s spectacular float flop. The listing stands as a clear lesson for wannabe public stocks everywhere, not just tech companies.

When it comes to selling shares, if investors have just had their fingers burnt on one float, it pays to be prudent. In fact, it is always wise to leave something on the table, as the saying goes.

You could of course argue the opposite: if Deliveroo were guilty of wildly overpricing its stock, then Darktrace shares have been massively underpriced after its original valuation was effectively cut in half.

Blame the investment bankers, in this case Jefferies and Berenberg, as opposed to Goldman Sachs and JP Morgan who led the Deliveroo listing. They’re paid handsomely to get this stuff right. Still, even that assessment is probably unduly harsh. It’s an inexact science and Darktrace couldn’t afford to be greedy, not with the company also facing multiple questions about its links to chief backer Mike Lynch (who is fighting extradition to the US over fraud charges, allegations he denies).

A second high-profile dud would have been a disaster for the City as it gears up to take on the US as a float destination for Europe’s best and brightest technology companies.

So chief Poppy Gustafsson will feel vindicated, at least for now. The 38-year-old has strongly dismissed any suggestions that Darktrace has any similarities with Deliveroo. While her firm can point to genuine technology at the heart of its operations, Deliveroo, with its smartphone app and army of bike couriers, is merely “tech-enabled”, she argues.

It’s an important point. To lump lots of companies into the same tech bracket and expect them to all perform the same is facile in the extreme.

Nevertheless, for all Gustafsson’s self-assurance there are still some suspicions about how justified its tech credentials really are. Questions have been asked about the relatively meagre sum Darktrace spends on research and development compared to rivals, and whether that is being masked by a reliance on aggressive marketing.

Although investors have shown they are prepared to hold their nose and look the other way, they shouldn’t get too carried away.

The shadow of Lynch will continue to loom large. There is still the possibility that Darktrace faces money laundering charges arising from the prosecutions of the tycoon and former right-hand man Sushovan Hussain in the US.

The company has also warned that its share price could be undermined if Lynch loses the case and is forced to sell his stake. These are serious risks that haven’t suddenly been magicked away by the excitement of a few hours of frenzied trading.

Barclays boss bets on a boom

The contrast between the bullishness of Barclays boss Jes Staley and the caution of the bank’s shareholders couldn’t be more stark.

Investors thumbed their noses at Staley’s excitable prediction of the biggest economic boom since the Second World War, making Barclays the steepest faller on the FTSE 100 after an eye-watering 6pc drop.

But after the bank reported its strongest quarterly figures for 13 years, the American is entitled to dream big. Profits doubled between January and March with its under-fire investment banking arm once again performing strongly. His optimism is to be welcomed. During the Brexit referendum too many chief executives delighted in talking Britain’s prospects down. They would be foolish to do so this time around.

Fuelled by record savings and pent-up demand Staley thinks growth will be “spectacular” but the bank’s decision to not release provisions set aside for bad loans, spooked the City.

Still, one can’t help but feel that investors are far too jumpy. The financial crisis was 13 years ago and although no bank could ever be considered bombproof, the industry is a different prospect altogether now thanks to the decisive action of the Bank of England and the Financial Conduct Authority to make the financial sector more resilient.

The speed with which banks have bounced back from the pandemic is also strong grounds for optimism. A stock market re-rating of bank stocks feels overdue.

‘These are serious risks that have not suddenly been magicked away’