Dell's SecureWorks Set to Price First U.S. Tech IPO of the Year

SecureWorks Corp., the cybersecurity company owned by Dell Inc., is planning to go public this week in the first initial public offering of a U.S. technology company this year, after the slowest start for offerings since the recession.

The Atlanta-based company, which says it has served more than 4,200 customers in 59 countries, is seeking to raise as much as $157.5 million in an IPO scheduled to price Thursday after markets close.

While SecureWorks, which provides software to prevent and detect security breaches, will be the first U.S. tech IPO of 2016, it shouldn’t be confused with attention-grabbing startups garnering billion-dollar valuations, according to Kaylan Tildsley, a partner at Triton Research. SecureWorks is a more mature, slow-growth business, whose IPO may not be an indicator for tech offerings in general, she said.

It’s “an old tech company,” said Tildsley, whose firm analyzes tech companies preparing to go public. “It doesn’t fit the stereotype.”

FireEye Inc., which SecureWorks lists as a competitor in its prospectus, went public in 2013 and has dropped about 16 percent since it began trading. Palo Alto Networks Inc., another rival, sold shares in an IPO in 2012. The stock has more than tripled.

SecureWorks is offering 9 million Class A shares for $15.50 to $17.50 each, regulatory filings show. Proceeds will be used for working capital and other uses, including developing new products and possible acquisitions of businesses or technology.

Dell Ownership

The company is a wholly owned subsidiary of Dell and Dell’s parent, Denali Holding Inc. Following the offering, Denali will own all outstanding shares of SecureWorks’ Class B common stock, representing about 86 percent of total outstanding common shares, and about 98 percent of the combined voting power, according to the prospectus.

In October, Dell agreed to buy EMC Corp. for about $67 billion in the largest technology acquisition ever. 

There have been 12 U.S. IPOs this year, excluding special purpose acquisition companies, closed-end funds and real estate investment trusts, according to data compiled by Bloomberg. That’s the slowest pace since the financial crisis. Still, there are signs of life. Bats Global Markets Inc. completed an IPO last week, pricing its shares at the top of the marketed range. The stock surged 21 percent in its debut. The other companies that have gone public in 2016 have been in the health-care industry.

MGM Growth Properties LLC, a REIT, raised more than $1 billion in its IPO Tuesday, and climbed 4.8 percent in its first day of trading Wednesday.

For the year ended Jan. 29, SecureWorks posted a loss of $72.4 million on net revenue of $339.5 million. That compares with a loss of about $38 million in the year-earlier period, on net revenue of $262 million.

Bank of America Corp., Morgan Stanley, Goldman Sachs Group Inc. and JPMorgan Chase & Co. are leading the offering. The company plans to list its shares on the Nasdaq Stock Market under the symbol SCWX.

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