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Kape’s transformational acquisition

An acquisition should prove to be a game changing deal for the cyber security software company

Kape Technologies (KAPE:123p), a provider of cyber security software and a constituent of my 2017 Bargain Shares portfolio at 47.9p when the company was known as Crossrider, has pulled off a major earnings enhancing acquisition that sent its share price surging. It also vindicates my decision to recommend exploiting the glaring valuation anomaly on offer when the shares were priced at a bargain basement 70p only a couple of months ago (‘Exploit Kape’s valuation anomaly’, 18 Sep 2019).

Kape is paying $127.6m (£99m) for Colorado-based Private Internet Access (PIA), a leading provider of virtual private network (VPN) solutions that encrypt and secure internet connections and protect individuals' privacy and digital data. Founded a decade ago, PIA now has over 1m paying subscribers globally, of which almost half are based in the US. It’s an area of cyber security that Kape’s management know incredibly well.

Since acquiring CyberGhost, a leading cyber security software-as-a-service (SaaS) provider of VPNs, in March 2017, Kape has more than trebled its user base. Digital privacy is a fast-growing market that is worth $24bn globally and is expected to grow by 50 per cent by 2022, according to industry experts. It’s not difficult to understand why as the increasing occurrence of data breaches and phishing attacks by cyber fraudsters are making consumers more concerned about their own data privacy and the need to guard against identity theft.

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