Dell’s SecureWorks stumbles in first tech IPO of the year

It has been a dry year for tech IPOs. Up until today’s SecureWorks offering, there had been zero in the U.S. in 2016. Zero. This compares to seven in the same period last year and 24 in that timeframe the year before.

So tech investors and late-stage private companies were watching SecureWorks closely, to see if the tech IPO window would reopen. It is one of the few indications we have right now to assess public investor appetite for tech IPOs. Unfortunately, SecureWorks faltered.

The unicorn-sized security company split from Dell, although the computer manufacturer remains its majority owner. SecureWorks raised $112 million in the offering, after pricing its IPO at $14 per share. But the company was expecting the initial price to be between $15.50-$17.50.

TechCrunch spoke to CEO Mike Cote about why they went public right now and why he is optimistic that SecureWorks will do well as a public company.

Cote told TechCrunch that the IPO has nothing to do with Dell’s acquisition of EMC. He said that the process had begun before that and that the move will allow SecureWorks to “go back to our entrepreneurial roots and accelerate the changes we can make and our growth.”

Cote says the company, which has big corporate clients including Bank of America, is in a position to succeed in what is a very competitive landscape, with countless security businesses. Cote says they are focused on emerging categories such as the Internet of Things and that SecureWorks will evaluate threats and “create the appropriate actions to help prevent or detect them and provide actionable intelligence and dynamic context.”

Atlanta-based SecureWorks was acquired by Dell for more than $600 million in 2011, but its current market cap is twice that. Yet while the company has seen an acceleration in revenue growth, its costs have grown, leading to widening losses.

Cote maintains that recurring subscriber revenue will help them excel as a public company. “The business is very predictable,” he says. “Michael Dell gave us the opportunity to invest ahead of our growth. We’re able to deal with the growth and the things that may be coming down the pipe.”

Yet SecureWorks closed the day at $13.88, beneath the $14 IPO price. The offering certainly did not assuage concerns about the current environment for tech IPOs.