US investor to buy Darktrace for $4.3B in blow to UK stock market

British cybersecurity flag bearer Darktrace is set to leave London’s stock market after agreeing a £4.3bn sale to US private equity firm Thoma Bravo.

Shareholders will have to approve the takeover before it’s rubber-stamped. The chair of Darktrace, Gordon Hurst, said the deal represents “an attractive premium and an opportunity for shareholders.”

“The proposed acquisition will provide Darktrace access to a strong financial partner in Thoma Bravo, with deep software sector expertise, who can enhance the company’s position as a best-in-class cyber AI business headquartered in the UK,” he added.

The deal would end a turbulent spell on the London’s Stock Exchange (LSE) for Darktrace.

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Founded in 2013, the Cambridge-based company has pioneered the use of AI for threat detection and prevention. But the business has attracted severe criticism from investors.

Darktrace’s market impact

In 2022, short-seller Matthew Earl said Darktrace’s business model was “watery-thin” and based more on marketing than substance.

Investment bank Peel Hunt also questioned the company’s culture. Analysts at the investor said in 2021 that some customers had described Darktrace product as “snake oil.” The company’s shares promptly plummeted in value.

Darktrace stock has also been affected by concerns about co-founder Mike Lynch. The British tech entrepreneur is currently standing trial in the US for alleged fraud. Lynch is no longer involved in Darktrace management but remains a substantial shareholder.

Amid the controversies, Darktrace’s tech has also attracted acclaim. Its most notable innovation is the application of unsupervised machine learning to analyse data at scale. Any anomalies can then instantly trigger threat alerts.

Thoma Bravo said the takeover would bring the tech to more customers. For the LSE, however, the departure of Darktrace is a major loss. British chip designer Arm had also recently rebuffed London and opted instead for a US listing. Darktrace’s exit will spark further alarm about the LSE’s future as a leading listing venue.

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