McAfee Stock Drops After IPO, Dubbed a 'Broken Deal'

McAfee Stock Drops After IPO, Dubbed ‘Solid, Not Spectacular’

Written by Edward Gately
October 22, 2020

But one analyst isn't so bearish. Despite trading below its target price, McAfee still raised more than $700 million.

Shares of McAfee stock traded below the company’s IPO price on Thursday in a “solid, but not spectacular” Nasdaq debut.

That’s according to Eric Parizo, senior analyst with Omdia. Shares of McAfee stock hit a high of $19.50, below its $20 IPO price, and dropped. Barron’s called it a “broken deal.”

McAfee is trading under the ticker symbol “MCFE.” The company filed plans for its IPO last month.

Omdia’s Eric Parizo

“While its closing price ended up below its opening target, the company still raised in excess of $700 million,” Parizo said. “McAfee’s primary investors – TPG Capital, Intel and Thoma Bravo – had been growing increasingly impatient with the vendor’s multiyear transformation effort. Though the opening may not have exceeded expectations, they have to be pleased with the performance of the debut.”

With all of the challenges McAfee has faced, the fact that it made it to an IPO should be considered a “huge victory” for the company, its employees and its investors, he said.

“That said, Wall Street undoubtedly could not ignore the reality of McAfee’s own financial statement,” Parizo said. “Despite earning more than $1.4 billion in net revenue in the first half of 2020, the vendor only realized $31 million in net income in the same period. That is likely indicative of a company struggling underneath the burden of its own costs, particularly legacy debt. Keep in mind that its 2018 acquisition of cloud access security broker (CASB) Skyhigh Networks alone is believed to have cost McAfee a staggering $300 million at a minimum.”

McAfee Touts Benefit to Partners

Lynne Doherty is McAfee’s executive vice president of global sales and marketing. She said partners have a lot to look forward to from McAfee going public.

McAfee’s Lynne Doherty

“As a publicly traded company, McAfee plans to continue to expand the portfolio of solutions it offers through investment in new product and platform innovations,” she said. “This commitment to invest in our business to strengthen our global reach and scale will only benefit McAfee partners.”

Partners will play a “crucial role” in offering new solutions to McAfee’s large customers, Doherty said. They drive adoption of McAfee’s next-generation solutions and deliver McAfee’s mission to “keep the world safe from cyberthreats.”

“Our partners help us to scale further, provide a premium experience to customers, and ensure that customers keep their business outcomes in mind when building solutions with us,” she said.

McAfee sees an advantage from having both consumer and enterprise businesses, Doherty said.

“Building our consumer business around our formidable enterprise security business enabled us to secure digital experiences spanning from individuals to nation states,” she said. “Importantly, being able to leverage shared insights across consumer and enterprise businesses leaves us uniquely positioned to provide comprehensive cybersecurity solutions designed to protect consumers, enterprises and governments against adversarial threats across cloud, devices, and on-premises and hybrid environments.”

As a publicly traded company, McAfee will continue to execute on its long-term strategic vision, Doherty said. Look for an expansion of its portfolio as well.