Shares in cybersecurity specialist Darktrace (LSE: DARK) have fallen by 35% over the last month. Its share price is now down by more than 50% from the record high of 1,003p seen on 24 September.
The stock’s collapse is a far cry from the surging gains seen soon after Darktrace’s IPO in April. So what’s happened?
Growth appears to remain strong. Darktrace’s revenue rose by 41% during the year to 30 June and was 51% higher during first quarter of the current fiscal year. Broker forecasts for the business have also remained stable and are unchanged since the end of September.
Heavy insider selling
However, private equity investors who backed the firm before its flotation have been selling heavily. According to stock market statements, three of the firm’s top 10 shareholders have sold £395m of stock since August.
This includes £250m of sales in October and November. These sales took place at prices between 580p and 750p per share — significantly above the current Darktrace share price of 490p.
Private equity selling is not unusual after a company goes public. But a sudden influx of shares onto the market can create an imbalance between buyers and sellers, depressing the share price.
Darktrace remains positive on its growth outlook. The company expects to report revenue growth of between 37% and 39% for the current year. However, brokers forecasts suggest the company will remain loss-making for at least the next two years.
