SecureWorks (SCWX - Get Report) shares have recover slightly from a diasterous debut last week, but the first tech initial public offer of the year continues to languish below its issue price after it proved to be the wrong company at the wrong time.
The stock gained 11 cents to $13.61 midday Tuesday after it priced on Thursday, April 21, at $14 per share, well below the $15.50 to $17.50 range set to gauge investor interest. It closed at $13.50 per share Monday.
Although many hoped the offer might rekindle interest in tech IPOs amidst a disappointing earnings season, SecureWorks, the cybersecurity division of PC giant Dell, failed to carry interest because of red ink, dependence on major customers and competition on capital markets from at least one profitable rival.
The issue also comes as venture capitalists rethink the value of unicorns, or start-ups that have an estimated worth above $1 billion.
The SecureWorks IPO valued the company at $1.12 billion.
"It was never a bellwether IPO," said Srini Nandury, senior managing director at Summit Research Partners. "People are actually writing their valuations down. That tells me that the market is not that good."
Cybersecurity enjoyed a bit of a renaissance in 2015 as companies boosted investment while fretting over high-profile attacks including those at T-Mobile (TMUS - Get Report) and Scottrade. But reality and normal online defense spending settled in this year.
At $14, SecureWorks trades at 2.9 times its enterprise value to sales, according to Trent Tillman, president and co-founder of SyndicateTrader, which is in-line with three other unprofitable cybersecurity companies that have gone public in the last few years. Those companies trade at between 2.65 times and 3.7 times.
However, those rivals all now trade below their IPO prices.
Rapid7 (RPD - Get Report) debuted in July at $16 and slipped slightly Tuesday to $12.42 per share, FireEye (FEYE - Get Report) sold shares in Sept. 2013 at $20 and gained 50 cents Tuesday to $18.15 while London's Mimecast (MIME - Get Report) held its Nasdaq IPO in November at $10 and but currently trades at around $8.55 a piece Tuesday.
One cybersecurity company in the pack is performing very differently. CyberArk Software (CYBR - Get Report) sold its shares for the first time at $16 in Sept. 2014 and the stock was up slightly at $39.62 Tuesday. The difference? In the fourth quarter, CyberArk saw net income grow 48% to $10.9 million from $6.7 million in the same quarter a year earlier.
In the same period, SecureWorks lost $14.9 million.
To be sure, investors have believed the growth story behind past IPOs and forgiven unprofitable debutantes but they've grown wary.
"If SecureWorks' so-so IPO wasn't entirely due to the broader market or the company, maybe it had something to do with the offering itself," wrote Brenon Daly, of 451 Group, in a note.
In the sale, Dell retained all of the company's Class B stock, giving it 86.8% of SecureWorks and 95.6% of its voting rights.
"An established tech company acquires a fast-growing startup, then spins off a minority stake of a class of equity that effectively gives shareholders no voice in the direction or outcome at the company," Daly wrote.
SecureWorks underwriters included Bank of America Merrill Lynch, Morgan Stanley, Goldman Sachs and JPMorgan.