With high-profile data breaches becoming the norm, it is a good
time to own a cybersecurity firm.
At least that is the logic Rapid 7 Inc. seems to be capitalizing
on. The company priced its initial public offering Thursday night
at $16 per share, above expectations. Shares of Rapid 7 jumped 54%
in their market debut on Friday, reaching $24.66 in afternoon
trading.
Based on the trading, Rapid 7's market cap stood at $938.58
million. That compares to fellow cybersecurity firm Qualys Inc.'s
market capitalization of $1.25 billion.
Rapid 7 Inc. develops and sells licensed software and
cloud-based software services to businesses to protect them against
security attacks.
It is a hot business to be in.
Shares of already-public cybersecurity companies have been on a
tear so far this year. The PureFunds ISE Cyber Security ETF is up
20% year to date, far outpacing the broader market. In the same
period the S&P 500 has risen 3% and the Nasdaq Composite Index
is up 8.7%.
Recent security breaches, such as the ones that hit Target Corp.
and the U.S. Office of Personnel Management, have drawn investor
interest in these companies.
Technology-research firm Gartner Inc. expects
information-security spending to rise 7.1% from a year earlier in
2015. But like with any highflying area of the market, there are
risks, analysts warn, which include the possibility that
cybersecurity shares could face big declines and heavy
volatility.
There are also plenty of competitors, including Qualys and Intel
Corp.-owned McAfee, among others.
Rapid 7 is trading on the Nasdaq Global Market under the symbol
"RPD." Morgan Stanley and Barclays are leading the deal.
Rapid 7 has granted the underwriters a 30-day option to purchase
up to an additional 967,500 shares to cover overallotments, if
any.
Also, entities affiliated with private-equity firm Technology
Crossover Ventures, a partial owner of the company, agreed to
purchase $5 million of Rapid 7's stock in a private placement at
the price of the IPO, the company said in a regulatory filing.
Deborah Gage contributed to this article.
Write to Corrie Driebusch at corrie.driebusch@wsj.com
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