Dell Subsidiary SecureWorks Files To Go Public, Shows Ramping Losses

23 Dec 2015 | Author: | No comments yet »

Dell Files to Take Its SecureWorks Division Public Next Year.

Today Dell subsidiary SecureWorks filed to go public, showing expanding revenue, and ramping losses. Dell Inc.’s cybersecurity unit SecureWorks Corp., which had previously filed confidentially for an initial public offering, publicly outlined its plans for the IPO. SecureWorks plans to sell its Class A common stock to the public, while Dell’s holding company, Denali Holding Inc. will indirectly own its Class B stock, according to a filing with the U.S.

The company said in a filing that it expects to sell up to $100 million in stock in the IPO, though that figure is a placeholder and can often change before the company sells its shares. Proceeds from the cybersecurity firm’s IPO will be used for working capital and other purposes like developing new technologies and acquisitions, the filing said.

In the nine months ending in October, SecureWorks posted a net loss of $57.5 million — almost twice as much as it lost in the same period a year earlier — on sales of $245.4 million. If that all seems like a bit much, it’s fair to say that the current mix of financial and corporate movements inherent to the above are past the point of being arcane, and border on the asinine.

Atlanta-based SecureWorks sells managed-security services, online tools that companies can use to keep tabs on their network activity and prevent hackers from breaking into their computer systems. All that aside, the SecureWorks IPO has two interesting components: Its increasing rate of lossmaking, and its place in the larger Dell-EMC transaction. High-profile incidents have hit big companies including Home Depot Inc. and Target Corp. as well as the Internal Revenue Service and the Office of Personnel Management. SecureWorks’ S-1 filing contains quite a lot of language regarding its offering, and how the company’s assets were part of its corporate parents’s going private. In its filing, SecureWorks cited Gartner Inc. and Frost & Sullivan statistics about the growing security market and noted that SecureWorks has “global visibility into the cyber threat landscape through our work for over 4,100 clients across 61 countries” as of Oct. 30.

Upon the completion of Dell Inc.’s going-private transaction, we guaranteed repayment of certain indebtedness incurred by Dell to finance the transaction and pledged substantially all of our assets to secure. Under the JOBS Act, companies with revenue below $1 billion are allowed to keep filings confidential until they are ready to market shares to potential investors.

The filing goes on to note that even after the IPO, the company will not be independent, something that relates at least mildly to the situation of VMWare. Here’s SecureWorks: Denali will continue to control us following this offering, and will be able to exercise control over all matters requiring approval by our stockholders, including the election of our directors and approval of significant corporate transactions. Given that level of non-control for shareholders that may buy into its offering, it could be that appetite for SecureWorks’ equity will be depressed.

The company listed a generic, $100 million offering total in its S-1, a sum that is usually employed as a placeholder for a later, more specific figure.

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