The security software company McAfee is preparing to go public this week.
It plans to make its market debut on Thursday, October 22. You’ve probably heard of this company when it comes to keeping your computer free of security threats. The company sells its security software and services to consumers and businesses worldwide. For me, the McAfee name holds a special significance: It reminds me of logging onto the internet as a kid… but before I could do that, I had to wait for the McAfee virus software on our family computer to finish scanning.
The company is headquartered in Santa Clara, California and was founded in 1987 as McAfee Associates. In February 2011, the company was purchased by Intel (NASDAQ: INTC) and became part of its security division. Then, in 2017, a deal between TPG Capital and Intel created the McAfee that we know today. Peter Leav is the president and CEO of the company and has only been in the position for about eight months. But that doesn’t mean he lacks management experience; he was previously the CEO of BMC Software and the CEO of Polycom.
McAfee is a brand that consumers have grown to trust. Its name alone is synonymous with cybersecurity. It’s the first thing that pops up in my head when I think about computer security. Since the beginning of the internet age, there have been threats to user security. Now more than ever we need to maintain the safety and security of our devices, especially when our sensitive data is now shared between our computers, phones, and tablets.
We know that the cybersecurity software industry is crucial to our everyday lives, not only for consumers but for big businesses and governments that need to protect sensitive information. If one of these big businesses or government agencies had a security breach, that would be very, very bad news for the millions of people who relied on that particular business or government agency to keep their information safe. As of June 27, 2020, McAfee management reported that more than 600 million devices have been protected. Some of the company’s biggest clients include governments and businesses. McAfee offers them computer endpoint protection, identity protection, WiFi protection, and privacy.
According to 2019 Verizon’s Mobile Security Index, 87% of enterprises saw growing mobile threats, which have outpaced other threat types. McAfee has expanded its services beyond PCs and Macs to mobile devices. People are doing more on their phones and tablets, requiring security for those devices. Not to mention, the cybersecurity software and services market is expanding. A 2020 market research report by Grand View Research notes the global market for cybersecurity software and services was estimated at $157 billion in 2019 and is expected to exceed $300 billion by 2027 — this forecast represents a strong CAGR of 10% from 2020 to 2027.
According to the company’s S-1 filing, McAfee earned $2.64 billion in revenue in 2019, with a loss of $236 million. For the first 26 weeks of 2020, the company reported revenue of $1.4 billion and a net income of $331 million. Once the deal is finalized, TPG Capital, Thoma Bravo, and Intel will have 82.2% of the voting power of McAfee.
The company plans to use its IPO proceeds to pay down its debt. Generally, that’s something you don’t want to see from a company that’s going public. McAfee’s S-1 shows that the company listed about $4.66 billion in debt, and after the offering, it could reduce that debt to about $4.15 billion. As of June 27, 2020, the company had $257 million in cash and $7.8 billion in total liabilities. Taking a look at McAfee’s financials, it appears that it’s growing its top-line revenue and has been able to increase its gross profit and gross margin, which is a good sign for the company’s growth trajectory.
McAfee plans to list on the Nasdaq(NYSEARCA:QQQ) under the ticker symbol “MCFE.” As I’m writing this, the expected IPO price range is $19–$22 per share. We’ll find out the actual IPO price sometime late Wednesday night. McAfee is set to raise around $759 million in gross proceeds if the company selects a midpoint price of $20.50 per share. If McAfee’s IPO is successful, that would put the company’s valuation near $13 billion. The underwriters on this deal include Morgan Stanley, Goldman Sachs, TPG Capital, Bank of America Securities, and Citigroup.
This is the second cybersecurity company to go public in 2020 — Sumo Logic (NASDAQ: SUMO) went public last month. McAfee sees the opportunity to benefit from a robust IPO market before any potential market volatility in these last two months of the year. With that being said, this IPO likely isn’t all it’s cracked up to be, especially with the company’s massive amount of debt.
If you’d like to receive more information about upcoming IPOs, click here to stay up to date.