Security IPOs: a good bet
By Om Malik
[I]SS Group (ISSX), a network security software company based in Atlanta,
Ga., began its life as a Georgia Tech University student project in 1994.
Four years later it is one of the hottest new companies to list on the
technology-heavy Nasdaq Exchange.
ISS Group went public on Mar. 24, and saw its shares soar 78%, to $39,
from the initial offering price of $22 a share. At the end of trading on
May 15, ISS was up 92%, to $42.125, giving the company a market
capitalization of $550 million. Not bad for a company which has yet to
turn a profit on sales of $13.5 million in 1997.
ISS Group's gains are representative of the spectacular stock market gains
posted by security software companies. According to New York-based
investment management firm, CIBC Oppenheimer, on average, public security
software companies are up 253% since going public.
Take Axent Technologies (AXNT), for example. The company tapped the public
markets on Apr. 24, 1996 at $14 a share. On May 8, 1998, Axent closed at
$29.88, up 113%. Another big gainer is Network Associates (NETA), up
1,271% to $65.13 from its IPO price of $4.75 a share. (Click here to read
more about Network Associates. Get Network Associates corporate profile.)
However, call the sector a late bloomer. With a handful of exceptions, the
group companies start posting strong performance only in their second year
of existence, according to CIBC Oppenheimer research. (See table, below.)
Example: Axent, which was down 6% in its first year as a publicly traded
company, is now up 113%. Similarly, Symantec (SYMC), which went public on
June 15, 1989 at $4.75 (split adjusted), was up a mere 155% in year one,
but on May 8, 1998 it closed at $28.13, up 492%.
For investors who have patience to handle the early jitters of the IPO
aftermarket, security software stocks can prove to be a prudent bet.
IPO 3/27/98
date price 1-year Price Change
Company change from
(%) IPO
(%)
Axent
Technologies 4/24/96 $14.00 -6% $29.88 113%
Checkpoint
Software 6/28/96 14.00 71 43.13 208
Technologies
Cylink Corp. 2/15/96 15.00 -27 14.94 0
Dr. Solomon's
Group PLC 11/26/96 17.00 104 35.63 110
Internet
Security 3/23/98 38.00 N/A 37.88 0
Systems
Network
Associates 10/15/92 4.75 -63 65.13 1,271
Memco
Software Ltd. 10/16/96 15.00 75 31.00 107
Raptor
Systems 2/7/96 15.00 27 15.00 0
SCM
Microsystems 10/7/97 13.00 N/A 77.63 497
Secure
Computing 11/17/95 16.00 -42 13.75 -14
Security
Dynamics 12/14/94 4.00 1119 41.13 928
Technologies
Symantec
Corp. 6/15/89 4.75 155 28.13 492
Trusted
Information 10/10/96 13.00 -8 20.56 58
Systems
V-One Corp. 10/24/96 5 13 2.75 -45
Verisign
Corp. 1/30/98 14.00 N/A 42.50 204
Total 253.3%
Raptor stopped trading as of February
6th, one day after board approval of
Axent/Raptor acquisition.
Source: CIBC Oppenheimer Corp.
-o-
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