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Proofpoint to Go Private: Cybersecurity ETFs Surge

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Proofpoint (PFPT - Free Report) was a star performer in Monday’s trading session, as the stock skyrocketed as much as 33% to a new high of $174.25 but closed a little lower, rising 31%. The massive gain for the cyber security firm came following the $12.3 billion buyout deal with Thoma Bravo, a leading private equity investment firm focused on the software and technology-enabled services sector (read: Tech ETFs Are Back in Momentum, Soar to All-Time High).

Deal in Focus

Per the terms of the deal, Proofpoint shareholders will receive $176.00 per share in cash, representing a premium of about 34% over Proofpoint’s closing share price on Apr 23, 2021, and a premium of about 36% over Proofpoint’s three-month volume-weighted average closing share price through Apr 23, 2021.

Proofpoint has established itself as a true powerhouse in the cybersecurity sector due to its innovative suite of market-leading products and impressive customer base of leading companies around the world. Collaborating with the cyber security firm will leverage Thoma Bravo’s significant security and operational expertise to help accelerate the company’s growth.

The deal, which has been approved by Proofpoint's board but awaiting shareholders’ and regulatory approvals, is expected to close in the third quarter. It includes a 45-day “go-shop” period expiring on Jun 9.

With the Proofpoint acquisition, Thoma Bravo continued a cybersecurity acquisition spree. The private equity firm also bought Imperva for $2.1 billion and Barracuda Networks for $1.6 billion. In addition, it took the majority stake in Centrify, a rival of CyberArk Software (CYBR - Free Report) .

ETF Impact

The news led to a surge in cybersecurity ETFs. Global X Cybersecurity ETF (BUG - Free Report) and Wisdomtree Cybersecurity Fund (WCBR - Free Report) were the biggest winners, climbing more than 4% on the day. iShares Cybersecurity and Tech ETF (IHAK - Free Report) , First Trust NASDAQ Cybersecurity ETF (CIBR - Free Report) and ETFMG Prime Cyber Security ETF (HACK - Free Report) gained 3.1%, 2.6% and 2.3%, respectively.

Below, we profile each of these in detail:

BUG

This ETF offers exposure to the companies that stand to benefit from the increased adoption of cybersecurity technology and follows the Indxx Cybersecurity Index. It holds 27 stocks in its basket with each accounting for less than 8.5% share. The ETF has accumulated $894.8 million in its asset base and trades in an average daily volume of 179,000 shares. It charges 50 bps in annual fees (read: JNJ Vaccine Pause Gives Stay-at-Home ETFs a Shot in the Arm).

WCBR

This fund has newly debuted in the space and has attracted $18 million in its asset base in just three months. It targets exposure to companies driving innovation in cybersecurity technologies by tracking the WisdomTree Team8 Cybersecurity Index. The ETF holds 25 stocks in its basket with each accounting for less than 6.5% share. It charges 45 bps in annual fees and trades in an average daily volume of 27,000 shares.

IHAK

This fund provides access to companies at the forefront of cybersecurity innovation and follows the NYSE FactSet Global Cyber Security Index. It holds 43 stocks in its basket with each making up for no more than 5.7% of the assets. IHAK has AUM of $467.7 million and charges 47 bps in fees per year. It trades in volume of 134,000 shares a day on average.

CIBR

This ETF has AUM of $3.7 billion and charges 60 bps in annual fees. It trades in a good average daily volume of around 542,000 shares. The fund follows the Nasdaq CTA Cybersecurity Index, which measures the performance of companies engaged in the cybersecurity segment of the technology and industrials sectors. In total, the product holds 40 stocks in its basket with each accounting for no more than 6.6% of assets (read: A Quick Guide to Cyber Security ETFs).

HACK

The fund provides global exposure to the cybersecurity industry, comprising companies that offer hardware, software, consulting and services to defend against cybercrime. It tracks the Prime Cyber Defense Index, holding 59 securities in its basket with each accounting for less than 3.7% share. The fund has amassed $2.1 billion in AUM and charges 60 bps in fees per year. Volume is solid as it exchanges nearly 192,000 shares in hand per day.

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