Apps & Software

Will This Strategic Investment and Acquisition Finally Turn FireEye Around?

FireEye Inc. (NASDAQ: FEYE) has announced a few key updates, which sent shares of this cybersecurity firm higher on Friday. While FireEye has not really kept pace with the cybersecurity industry, this move is a step in the right direction for a few reasons.

First, FireEye announced that it received a $400 million strategic investment led by Blackstone Group Inc. (NYSE: BX). Note that FireEye has a market cap of roughly $3.4 billion. Blackstone, in conjunction with ClearSky, a cybersecurity-focused investment firm, will be co-investors in the transaction.

Under the terms of its investment, Blackstone and ClearSky will purchase $400 million in shares of a newly designated 4.5% Series A Convertible Preferred Stock of FireEye, with a purchase price of $1,000 per share. The Series A Preferred will be convertible into shares of FireEye’s common stock at a conversion price of $18.00 per share.

FireEye intends to use the proceeds to support strategic growth initiatives, including the acquisition of Respond Software announced today, as well as increased investment to accelerate the growth of the company’s cloud, platform and managed services portfolio.

Separately, FireEye announced the acquisition of Respond Software, the cybersecurity investigation automation company and creator of the Respond Analyst. The transaction closed on November 18 and is valued at approximately $186 million in cash and stock.

The Respond Analyst automates the investigation and triage of security data, at machine speed, with a level of depth and consistency unmatched by human analysis. FireEye is looking to integrate this into its platform to further strengthen its cybersecurity platform.

Excluding Friday’s move, FireEye stock has underperformed the broad markets with a decline about 14% year to date. In the past 52 weeks, the share price is 17% lower. The First Trust Nasdaq Cybersecurity ETF (NASDAQ: CIBR), which tracks this industry, is up about over 23% year to date. With this investment and acquisition, FireEye could finally get back on track.

FireEye stock traded up about 5% to $14.99 on Friday, in a 52-week range of $7.54 to $18.34. The consensus price target is $16.96.