UBS quits Darktrace IPO

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Cybersecurity firm Darktrace is continuing to target a £4bn London initial public offer (IPO) despite broker UBS quitting the cybersecurity firm’s proposed float for compliance reasons.

The Swiss bank has reportedly told Darktrace that its compliance department would not allow necessary suspicious activity reports (SARs) to be signed off.

It comes amidst scrutiny over the company’s ties to British tech billionaire Mike Lynch.

The Swiss bank had been working on the market listing alongside Jefferies since November.

Previously, according to Sky News in September, Goldman Sachs ruled itself out of a role in the IPO due to potential legal ramifications.

Lynch, a founding investor in Darktrace and a former director, is presently facing possible extradition to the United States where he has been charged with 17 counts of securities and wire fraud.

It follows a £3.8bn UK civil fraud case related to his former company Autonomy which was bought by Hewlett Packard for £8.4bn in 2011 (HP subsequently wrote down US$8.8bn in connection to the acquired business, alleging accounting irregularities).

Lynch left the Darktrace board in 2018 and he retains an interest in the company via his investment fund Invoke Capital, one of the largest stakeholders in the pre-IPO group.

According to Sky News today, a source close to Darktrace has called the Swiss bank’s resignation “a UBS issue, not a Darktrace issue” meanwhile UBS declined to comment.

Insiders at Darktrace were reported to say the IPO is still “firmly on-track” and highlighted encouraging initial indications of interest from investors.

Jefferies now solely leads the London float which is expected to be backed by Berenberg and private-equity group KKR (which is already a major shareholder and has previously acquired shares from Invoke).

Darktrace is an artificial intelligence-led cybersecurity group, founded by University of Cambridge mathematicians.

Its technology, described as ‘pioneering’, is said to be able to identify a diverse range of threats including state-sponsored espionage at their earliest stages. The company’s clients include BT Group PLC, William Hill and US insurer AIG.

The company is headquartered in San Francisco and Cambridge. It has some 1,500 employees across 44 offices across the world.

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