Cybersecurity company SentinelOne Inc, valued at around $5 billion, is reportedly exploring options, including a potential sale, according to individuals familiar with the matter.
The company, headquartered in Mountain View, California, has recently become an acquisition target due to its shares experiencing an 80% decline in value over the two years. Initially benefiting from increased technology spending during the COVID-19 pandemic driven by work practices SentinelOne faced setbacks as companies reduced their information technology budgets when the economy slowed.
To facilitate discussions with buyers such as private equity firms SentinelOne has enlisted the services of investment bank Qatalyst Partners for advisory support.
However, the initial offers received did not meet SentinelOne's valuation. Consequently, negotiations may conclude without reaching a deal. The sources did not disclose the specific price sought by SentinelOne.
Neither SentinelOne nor Qatalyst has provided any comments in response to requests for clarification.
Following this news breaking on Monday afternoon in New York City trading sessions, shares of SentinelOne experienced a 19% surge. Reached $17.19.
Launched in Israel back in 2013. Currently operating globally SentinelOne offers protection against security breaches on laptops and mobile devices by implementing artificial intelligence technologies to detect unusual activities within enterprise networks.
SentinelOne, a company that competes with CrowdStrike Holdings Inc (CRWD.O), has a customer base that includes major corporations and the U.S. Government.
In 2021 SentinelOne went public on the U.S. Stock market with a valuation of $8.9 billion, receiving support from Daniel Loeb's hedge fund Third Point and venture capital firms like Tiger Global and Sequoia Capital.
However, despite investor enthusiasm, the company faced challenges in achieving profitability while maintaining competitive pricing to gain market share. In June SentinelOne also admitted to overestimating its recurring revenue and had to correct it due to changes in methodology and historical inaccuracies.
In its recent quarterly earnings report, SentinelOne revised its projected annual revenue growth and announced plans for a workforce reduction of approximately 5%.
Analysts at Morgan Stanley highlighted the upside for SentinelOnes stock value, given its significant discount compared to competitors.
"While recent setbacks have impacted investor confidence, we believe that the actual value of this asset is much higher than what the market reflects. Considering growth adjusted enterprise value/sales ratio, we see a risk-reward opportunity with SentinelOne currently trading at a 50% discount compared to peers," commented the analysts from Morgan Stanley.
According to a regulatory filing, SentinelOnes voting shares are controlled by Insight Partners, a private equity firm, who possess 47.7% of the shares. Redpoint Ventures, another investor, holds 22.9% of the voting shares.
Private equity firms have shown interest in investing in the cybersecurity industry. In November 2021, McAfee Corp was acquired for $14 billion by an investor consortium led by Advent International, an equity firm.
Thoma Bravo, a technology-focused equity firm, has also been actively acquiring companies in the cybersecurity sector. They have purchased Ping Identity, ForgeRock, Sailpoint Technologies, Magnet Forensics Inc. And others.