Cyber-security expert Sophos (SOPH) has garnered huge popularity as a stock over the past year or so, its relevance proven in the eyes of investors by major cyber attacks such as WannaCry. The group has achieved encouraging revenue growth and customer wins. And bosses recently raised their outlook for the year to March 2018. However, at 610p, the stellar price growth is feeding concern that Sophos may be overvalued.
The market was thrown this week by the news that major investor Apax, a private equity firm, and Pentagon Lock would sell 51.2m shares at 616p each, raising £315m in gross proceeds. The announcement, released after market close on 27 November, said the sale would be conducted via a placing. The next day, Sophos’s shares were down 6 per cent.
Apax took a majority interest in Sophos in 2010, prior to its 2015 Aim flotation and when the company was much smaller. This week’s sale was not the first time Apax has cut its stake since the IPO. The latest transaction reduces the sellers’ combined shareholding by nearly a half, leaving them with an 11.2 per cent position. Their remaining shares are subject to a minimum 90-day lock-up period, following the pricing date of 28 November.
Apax’s sale follows a series of director deals in recent weeks. As we noted in our last update on Sophos, chief executive Kris Hagerman sold 185,500 shares worth £1.1m, while non-executive director Steve Munford and the Munford Family Foundation also sold shares equivalent to £4.4m. Meanwhile, chief financial officer Nick Bray offloaded a total of 450,000 shares worth £2.6m. Mr Bray still has shares in the group which vest quarterly, suggesting that a strong performance-related incentive remains.
