Monday 26th June 2023
High demand for cybersecurity rolls out new investment opportunities
After a string of high-profile incidents, the sale of Australia's largest listed cybersecurity company, Tesserent (ASX:TNT) to French multinational Thales is a reminder of the value in carefully selected small cap stocks.
The threat of a cyber-attack has rattled many firms this year-both globally and here in Australia too.
With an increasing number of users, devices and programs available across most corporations, combined with the increased deluge of data, much of which is sensitive or confidential, the importance of cybersecurity continues to grow. The growing volume and sophistication of cyber attackers and attack techniques compound the problem even further.
The outlook is grim.
This month alone one of the largest known cyber-espionage campaigns has hit companies running critical US infrastructure, according to Western intelligence agencies and Microsoft. The BBC, British Airways and some of Britain’s other biggest companies have also been hit by cyberattacks as a result of data hacks at outsourcing suppliers.
In Australia, a major security breach occurred when FIIG Securities, which has 6,000 Australian investors and $5 billion under advice, confirmed on June 10, that they had been hacked, with detailed customer data stolen.
This is coupled with significant breaches experienced by a range of major companies over the past year with HWL Ebsworth, Latitude Financial, Medibank and Optus being some of the most prominent data and privacy breaches we have seen over the past 12 months.
In light of these developments corporates are scrambling to shore up their cybersecurity infrastructure, as hacking is likely to continue to be a major risk factor for organisations.
It came as no surprise when the Melbourne-based cybersecurity small cap Tesserent (ASX: TNT), announced it is to be acquired by French multinational Thales, in a $176 million share scheme.
The deal, which is subject to regulatory approval, values Australia’s largest listed cybersecurity company at $0.13 a share, which Thales said represented a 165.3 per cent premium to the closing price of Tesserent on June 9.
Shares jumped up 150 per cent higher at 12.25 cents on June 9.
This is a demonstrable indicator of the latent, capturable value that presently exists within the ASX small cap space.
Thales is already a major player in Australia’s cybersecurity scene. This acquisition presents a compelling bolt on opportunity as well as a great outcome for TNT shareholders, given the significant price premium on offer and the persistent financial challenges experienced over many years by the listed company.
Emanuel is the founder and principal at Datt Capital, an independent investment fund manager.
