A cybersecurity company published disappointing results. Its share price lost ground, and activist investment funds took advantage of the situation to invest. Some time later, it was announced that the company was being sold to a private equity fund at a premium on the market price. This is what happened in 2018 with Imperva, founded by Shlomi Kramer, and the story has now repeated itself with Israeli-US company Forescout Technologies Inc.(Nasdaq: FSCT).
Forescout reported last Thursday that it had been sold to US private equity funds Advent International and Crosspoint Capital for $1.9 billion, at $33 per share, 50% more than its share price in Forescout's IPO just over two years ago and an 18% premium on the closing price on the day before the report.
Forescout is one of quite a few Israeli or Israel-linked cybersecurity companies listed on Wall Street. The aggregate market cap of these companies is $54 billion. When it was still a private company, Forescout was a unicorn - a company with a value of over $1 billion - at a time when this status was more unusual in Israel's tech sector. Its IPO was at a lower valuation than $1 billion, but it is being sold now at $1.9 billion.
The most prominent Israeli cybersecurity company is Check Point Software Technologies Ltd. (Nasdaq: CHKP), which is also the most valuable Israeli company on Wall Street, with an $18.2 billion market cap. Check Point, which was founded in 1993, has been listed on Wall Street since 1996. With the publication last week of the company's 2019 financial results, cofounder and CEO Gil Shwed gave figures for Check Point's growth in the past decade, including $15.7 billion in aggregate revenue, $7.5 billion in aggregate net profit, and a number of employees that grew 2.5 times to 2,300.
Another record-setting company that is not Israeli, but was founded by an Israeli, is Palo Alto Networks, whose $24.1 billion market cap is higher than that of Check Point. The company was founded by former Check Point employee Nir Zuk, and also has operations in Israel. Other publicly-traded cybersecurity companies that originated in Israel include CyberArk Software Inc.(Nasdaq:CYBR), founded and managed by CEO Udi Mokady, and Varonis Systems, founded and managed by CEO Yaki Faitelson. Both of these companies held their IPOs on Nasdaq in 2014. A recent addition to the list is Tufin, which held its IPO last year.
The Israeli cybersecurity industry contains far more private companies, among them many startups just beginning (some say too many), which specialize in specific cybersecurity niches. Israel is a global cybersecurity center, and is sometimes referred to as a cybersecurity superpower. A quick search of the IVC database shows that there are over 500 companies related to cybersecurity in Israel.
The IDF technology units contribute to the industry's prosperity in Israel, because many of their employees are veterans of Unit 8200 and other such units. At the same time, in recent years, it was reported that fewer new cybersecurity companies were being founded in Israel, probably because the market is saturated. There is also consolidation in the market, and a number of private Israeli companies had large-scale exits in the past year: Armis was sold for $1.1 billion, ObserveIT was sold for $225 million, Demisto was sold to Palo Alto Networks for $560 million, and another company acquired by Palo Alto Networks was Twistlock for $450 million. Check Point also acquired Israeli companies, the largest of which was Dome9 in late 2019 for $175 million.
Published by Globes, Israel business news - en.globes.co.il - on February 10, 2020
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