The mission of Darktrace, it proclaimed at the top of its IPO announcement yesterday, is to “fundamentally transform the ability of organisations to defend their most critical assets in the face of rising cyberthreats”.
So after its own cyber disaster in the shape of Deliveroo’s disastrous debut, the London Stock Exchange could do with Darktrace’s help.
However, when the LSE boss David Schwimmer, Lord Hill of Oareford, the chancellor Rishi Sunak and co were promoting the City as a destination for promising technology companies this year, it is unlikely they would have pinned their hopes on a business backed by a man who is battling extradition to the US over fraud charges and is embroiled in a multibillion-pound civil case with HP.
Poppy Gustafsson, chief executive of Darktrace, insisted yesterday that her company is “fundamentally very different” to Deliveroo. No kidding.
Gustafsson, 38, was referring to Darktrace’s technology rather than its connection to Mike Lynch, but some of the risk factors outlined in the company’s registration document make the concerns about Deliveroo’s treatment of workers seem tame. The risks include potential liabilities from possible money laundering offences related to funding provided to the business by Invoke Capital, the investment firm Lynch co-founded, and allegedly unlawful activities related to the sale of Autonomy, the business he sold to HP.
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Lynch was a key early backer of Darktrace through Invoke and although he stood down as a non-executive director of the company in 2018, his ties with it are still significant. Lynch and his wife own 18.5 per cent of Darktrace and he is one of two members of its science and technology group — “a panel of leading experts to assist the company’s management in its consideration of science and technology matters” — having stood down from its advisory council last month. The links don’t stop there. Four of Darktrace’s top executives, including Gustafsson, used to work for Autonomy.
The company says the directors believe the risk of Darktrace being hit by any prosecution is “low” and that it is not the target of any Department of Justice investigation as far as it is aware. Lynch also denies any wrongdoing, it must be remembered.
Nevertheless, for some fund managers and their risk committees, this will all make the prospect of investing in Darktrace too much to stomach. It was too much for Goldman Sachs and UBS, according to recent media reports, who declined to be involved in the float.
Darktrace insiders insist the timing of the IPO is not linked to the rulings in Lynch’s extradition case and civil battle with HP, which are expected later this year and could either complicate the risks facing Darktrace or resolve them. Instead, they say, it is driven by the company’s commercial needs, such as funding its expansion.
Indeed, look beyond the links to Lynch and there is a lot to like about Darktrace.
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The company says it has developed start-of-the-art artificial intelligence which businesses can deploy to protect them from cybercrime. It sells its product to businesses on multi-year subscriptions, which give it a guaranteed source of long-term revenue. This is a model that has served software providers well in the past, including Microsoft.
So Gustafsson might be right, Darktrace is a fundamentally different prospect to Deliveroo; it is a genuine technology business rather than a food delivery service. Darktrace has even eschewed the dual-class structure that got Deliveroo into so much bother with the City. The problem is, though, there is so much else for fund managers to fret over.
Seller’s remorse?
So much for the online shopping revolution. On the first day of non-essential retail reopening, there were queues of people trying to get into Primark, Ikea and other shops across the country.
John Lewis put out a statement in which Pippa Wicks, the boss of the department store chain, said it was “fantastic to welcome customers back into our shops again”. Those words will rankle with the eight towns and cities where John Lewis announced last month it will close shops, putting 1,500 jobs at risk.
Could John Lewis and other brands which have closed shops during the Covid-19 crisis come to regret that decision? Data from Kantar last month showed that over-65s, who are largely vaccinated, increased their trips to the supermarket by 6.8 per cent month-on-month in March as their confidence grows. Digital grocery orders also dropped by 143,000 among this group.
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The Covid-19 crisis has boosted the growth of online shopping, but it will be fascinating to see how, or if, bricks-and-mortar retail fights back in the next few weeks.
Green alert
Analysts at UBS have published research that warned “fast fashion” sales could fall by 30 per cent in the next decade as young people become more aware of the enviromental impact of the clothing industry.
UBS stressed that this conclusion is “not a base-case UBS call” but a “possibility”, but it is a big warning to the fashion industry and retailers such as Primark, Asos and Boohoo. So far fund managers have focused their enviromental concerns on the oil giants and banks, but retail’s turn will come. UBS said that fashion’s carbon footprint is higher than aviation and shipping combined. Given the industry has also faced pressure over working conditions and pay, there could be a lot of difficult issues to resolve.
graham.ruddick@thetimes.co.uk
Alistair Osborne is away
