News: SecureWorks is targeting a valuation of less than $2bn.
The company may start its "roadshow" to advertise its public offering to investors next week, sources familiar with the matter told The Wall Street Journal.
Company shares are likely to be traded under the symbol "SCWX", when the company gets listed on the Nasdaq. SecureWorks offers information security services that help customers to protect their computers and network from cyber attacks.
A successful public issue by the company could indicate the healthy state of the IPO market in the US. The IPO could also be the first issue from a technology company this year.
US IPO market has been struggling due to high volatility in the equity markets in the past few months. The volatility has forced companies to delay their IPO launches.
Nutanix, a US-based data storage equipment firm, has halted its plans to launch an IPO though it had filed for the offering in December.
There has been no IPOs from the technology industry since mid December, when a small Chinese got listed on the exchange.
Given the uncertainty over the response to its IPO in the current market conditions, SecureWorks maybe likely to sell a small portion of equity, sources told the publication.
The company is likely to raise demand for its IPO by "limiting the supply". It may look to raise only $150m from the offer in order to ensure that its shares trade well on the exchange.
Valuation of the firm and funds to be raised from the IPO may fluctuate before the shares start trading on the Nasdaq stock exchange.
SecureWorks is now targeting to get a valuation of less than $2bn compared to its expectations of around $2bn valuation last summer. As the share prices of its competitors have dropped by 20%, the company’s expectations over its valuation have fallen.
The IPO market has witnessed its slowest growth on record in the first quarter of 2016 due to lack of public offers from technology firms. Nine companies had raised a total of just $1.2bn from IPOs in the March quarter.
Another reason for lackluster performance of the IPO market is the expensive valuations of tech companies. Most of the firms are having more than a billion-dollar valuation.
Though SecureWorks was founded during the previous boom in the technology sector and belongs to an established company, it is similar to other firms in terms of struggling to make profits. Its losses have been escalating despite a growth in revenue.
The company saw its net loss double to $72.4m in the last fiscal year ending 29 January 2016, even as its revenue increased by 30% to $339.5m.
Concerned over an increase in losses, investors have asked the company to come out with a turnaround plan.
SecureWorks disclosed its public issue plans in December after keeping the details about the filing of IPO papers with the regulator as confidential for few months.
The company has reportedly engaged with Bank of America Corp. and Morgan Stanley as the lead underwriters for the offer.
Last week, Dell announced that it had signed agreement to sell its IT services division to Japan’s NTT Data Corp for nearly $3bn. The sale comes at a time when Dell is nearing the completion of acquisition of EMC for $36bn.