Darktrace begins a share buyback of up to 4m shares in quest to boost shareholder value
Former tech darling Darktrace announced yesterday that it would start a share buyback programme of up to four million of its ordinary shares by or before 31 December 2022.
The maximum amount allocated to the programme is £30m and Darktrace said it will make disclosures during the buyback of the number of shares it has repurchased.
Buybacks are generally used to benefit shareholders to help them gain market value, plus a premium from the company. If the stock price then rises, those that sell their shares in the open market will see a tangible benefit.
The purpose of the buyback is in part, to satisfy Darktrace’s pre-existing obligations arising from its share incentive programmes. The Board of Directors agreed the maximum number of shares that can be bought back by Darktrace is 69,763,690 as per its AGM in November.
Analysts at Jefferies commented that although the share price has been volatile for the cyber company, it remains confident that “underlying trading is robust”.
The announcement comes less than a week after Darktrace lost its spot as a FTSE 100 company. Nonetheless, the investment bank sees the cyber company’s multi-million dollar deals with big players as key factors looking forward.
The analysts said the buyback was “a sign of management confidence”, and added: “Taken together with recent contract wins, this reaffirms our view that the balance of forecast risks is on the upside”. Jefferies reiterated its “Buy” rating for the share.
Russ Mould, analyst at AJ Bell, was less convinced, especially with the share price unmoved, and said: “The amount of cash involved is tiny, at a maximum £30m, compared to a market capitalisation of some £3bn, and the buyback is at least partly designed to help it cover share issuance to employees.”
Mould stated the buyback “cannot therefore really be read as a major signal from the Board that it believes the shares are undervalued“
Darktrace told Morning Wire that it was unable to comment on the move, however shares were down nearly two per cent yesterday at close to 419.59p.