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US cyber security company SentinelOne is playing with the idea of selling, among a number of other options.
The company’s shares have dropped in value by 80 per cent over the last two years, following businesses massively reducing IT spending due to a slower economy post-pandemic.
The company had thrived during COVID-19 lockdowns, with home workers spending more on technology. It went public in 2021 and has proved to be a poor investment since.
At this stage, the company has been painted as a takeover target and has hired investment bank Qatalyst Partners to oversee discussions with prospective buyers.
However, according to sources close to the issue via Reuters, SentinelOne has been disappointed with discussions so far, with offers falling short of what management is hoping for.
SentinelOne’s valuation at this stage is rather cheap. Considering industry-leading competitors like CrowdStrike have a price-to-sales valuation of about 14.8, SentinelOne has a P/S of only 8.6.
At the news of a potential sale, company shares jumped 19 per cent.
The US cyber security company was founded in 2013 in Israel by Almog Cohen, Ehud Shamir and its chief executive, Tomer Weingarten.
The company was backed by Third Point, a hedge fund run by Daniel Loeb, and several venture capital firms such as Tiger Global and Sequoia, leading to its first public valuation of US$8.9 billion.
To date, SentinelOne has an enterprise value of US$3.7 billion.
While SentinelOne has yet to comment publicly on the issue, it told shareholders in its latest quarterly earnings report that it would evaluate redundancies of about 5 per cent of the company.
However, according to notes from Morgan Stanley analysts via Reuters, SentinelOne’s low point could prove to be beneficial for potential investors.
“While recent execution missteps have shaken investor confidence, we think the intrinsic value of the asset is much higher than the market ascribes and see a compelling risk-reward with valuation now at a 50 per cent discount to peers on a growth-adjusted enterprise value/sales basis,” said the analysts.
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