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Carbon Black: Not A Buyer Of This Cloud Security Offering

May 07, 2018 5:04 AM ETCarbon Black, Inc. (CBLK)


  • Carbon Black has seen a successful IPO, which does not come as a surprise.
  • Strong growth and growth prospects make it a potential lucrative investment as sales and billing multiples are very reasonable at the offer price.
  • After shares have seen a big jump on their opening day, relative appeal has diminished, as I am not jumping on board at these levels.

Carbon Black (NASDAQ:CBLK) has seen a successful public offering, which does not come as a surprise as the company focuses on cloud security solutions, which it sells on a subscription basis. The company has seen very strong growth in recent years as rosy prospects make that investors are naturally attracted to such a growing business.

Relative appeal could be found at the offer price as the strong pricing action following the offering has removed this relative appeal in my eyes, as I will keep a close eye on the developments going forward.

Next Generation Security

Carbon Black provides so-called next generation security solutions. The company works with a predictive cloud solution, which continuously captures and analyses unfiltered data in order to provide a robust security solution. The ¨real-time¨ solution is critical as cyber attacks occur more frequently and quick responses are needed to remedy the impact of such attacks.

The challenge is that networks become more diverse at the same time, which increases the challenge to secure the corporate network. To provide security, Carbon Black focuses on the endpoint, which is the new perimeter, as these endpoints can be cell phones, laptops, desktop computers, but also printers, screens, cameras and other systems.

By the end of 2017, Carbon Black counts 3,739 companies as its clients, which resulted in revenues of little over $162 million, for average revenues of $43k per customer.

The Offering And Valuation

Carbon Black sold 8.0 million shares at $19 per share, being the high end of the preliminary offering range of $17-$19 per share, after the company already hiked this preliminary range from a previous range of $15-$17 per share.

The 65.8 million shares value the company at $1.25 billion at the offer price. If we include pre-IPO cash holdings of $36 million, as well as gross proceeds of $152 million

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This article was written by

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Finding value that gets unlocked in M&A, IPOs and other corporate events
The writer is a long term value investor and M.Sc graduate in Financial Markets with over 10 years experience. Value can be found in both long and short ideas and uses options to enhance the risk-return profile of investment ideas. Disclaimer: This article provides opinions and information, but does not contain recommendations or personal investment advice to any specific person for any particular purpose. Do your own research or obtain suitable personal advice.

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