IPO Failed Compliance Procedures
Officially, company officials still insist that the IPO is firmly on track, despite the fact that UBS’s withdrawal leaves the United States (US) investment company, Jefferies, as the only bank left to run the IPO.
Both investment companies were appointed in November last year to spearhead the IPO. However, the Swiss investing business informed the cybersecurity company it is quitting the IPO due to compliance concerns. This news comes after Goldman Sachs, one of the world’s largest investment businesses, previously withdrew from the IPO due to potential legal ramifications.
Accordingly, UBS’s compliance department did not allow the required suspicious activity reports (SARs) to be signed off. The bank’s officials are concerned about Darktrace’s links to Mike Lynch, a British billionaire who is facing charges of securities fraud, wire fraud, and conspiracy in the US.
Lynch, a tech entrepreneur who founded the software company Autonomy, is an early investor in Darktrace. He left the cybersecurity company in 2018, but he still holds a stake in the company through his investment business arm Invoke Capital.
He is facing charges related to HP’s acquisition of his software firm Autonomy ten years ago. In addition, the entrepreneur is facing a separate civil fraud trial in the UK.
Moreover, it could be that the UBS decision was impacted by the fact that the Dutch court decided in December that the new CEO of the Swiss company, Ralph Hamers, should face an investigation into a money-laundering scandal at the Dutch investment business company ING, where he previously worked.
The Darktrace IPO is supposed to be one of the biggest British public offerings in 2021 as it is valued at about £4 billion ($5.56 billion). Sky News quoted a source close to the cybersecurity business who said the UBS withdrawal is “a UBS issue, not a Darktrace issue.”
On the investors’ side, US-based private equity firm KKR is believed to be a major shareholder in the company and is expected to participate in the IPO, as well.
Darktrace is founded by University of Cambridge mathematicians and is focused on cybersecurity, with a specific focus on the enhancing role of artificial intelligence (AI). Its clients are businesses such as BT Group, William Hill, and insurance company AIG.
After Goldman Sachs initially withdrew from the Darktrace IPO process, their Swiss counterparts, UBS, also quit the offering due to compliance concerns.
About the Author
Mariliana has an MSC in Consumer Analytics and Business Strategy. She has a special interest in fast-moving industries and Big Data.