Jana Companions Will increase Stake in Rapid7, Eyes Potential Sale

Activist investor Jana Partners has taken a 13% economic interest in Boston-based Rapid7 and is evaluating potential buyer interest in the vulnerability management vendor.

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Jana teamed up with three cybersecurity executives in addition to funding agency Cannae Holdings – which has expressed curiosity in collaborating in a possible acquisition of Rapid7 – to unlock shareholder worth. Jana, Cannae and the particular advisors stated they’re working with Rapid7’s board and administration to cope with company governance and operational points that led to the corporate’s inventory being undervalued.

Rapid7’s inventory is up $1.94 – or 5.2% – to $39.30 per share since Jana introduced an elevated possession stake after the market closed Friday. However the firm’s inventory is down 28.5% for the reason that begin of 2024 and 71.6% from its all-time excessive of $138.41 per share in November 2021. Rapid7 at present has a valuation of simply $2.46 billion, properly under opponents Qualys and Tenable, that are value $4.68 and $4.84 billion (see: Why Activist Investor Jana Is Pressing Rapid7 to Sell Itself).

What Jana Desires to See Modified at Rapid7

In a regulatory filing Friday, Jana referred to as out operational execution, forecasting, investor communication, company governance, board composition and worker retention as areas of concern at Rapid7. The agency misplaced President and COO Andrew Burton in June, Chief Buyer Officer Larry D’Angelo in July and Vice President of World Advertising and marketing Planning and Operations Clifford Stevens in August. All took new jobs.

Jana spent $137 million to amass 5.8% of Rapid7’s excellent shares, Cannae spent $12.8 million to purchase 0.6% of the corporate’s excellent shares, and the three particular advisors spent $250,000 on their Rapid7 share purchases. Jana additionally teamed up with third-party monetary establishments to achieve financial publicity to a further 6.6% of Rapid7’s inventory, however lacks direct voting energy over these shares.

The particular advisors introduced in to help Jana and Cannae embrace: Michael Joseph Burns, who served as Imperva’s CFO from 2018 to 2019 and Gigamon’s CFO from 2014 to 2016; Chad Kinzelberg, who was Palo Alto Networks’ senior vice chairman of enterprise and company growth from 2012 to 2018; and Robert Bradshaw Henske, who was Intuit’s CFO from 2003 to 2004 and Synopsys’ CFO from 2000 to 2002.

Most of Jana’s holdings are exterior tech in areas equivalent to meals processing and rehab, whereas Cannae has an in depth footprint in membership soccer and informal eating. The particular advisors might due to this fact be candidates if Jana chooses to appoint its personal individuals to Rapid7’s board, providing experience in finance and company growth and direct enter into the corporate’s governance, compensation and operational choices.

Within the regulatory submitting, Cannae expressed willingness to take part in an acquisition of Rapid7, signaling {that a} sale to non-public fairness with Cannae’s involvement could possibly be attainable. Cannae’s possession footprint contains English membership AFC Bournemouth, Scottish membership Hibernian F.C., French membership FC Lorient, Tennessee-based O’Charley’s Restaurant & Bar and Massachusetts-based Ninety 9 Restaurant & Pub.

Rapid7’s Perilous State of affairs Years within the Making

Jana first introduced a “important” stake in Rapid7 on the Sohn Monaco Funding Convention in June together with plans to push the corporate to promote itself. Jana acquired two members onto NewRelic’s board in June 2022 and helped steer the observability vendor towards a $6.5 billion sale to Francisco Companions and TPG simply 13 months later. Neither Jana, Cannae nor Rapid7 instantly responded to requests for remark.

Rapid7 has reportedly been on the promoting block for practically 17 months, and Reuters reported in February 2023 that the corporate employed Goldman Sachs to assist with a possible sale to a personal fairness agency or one other purchaser. Thoma Bravo, TPG Capital and Alphabet all reportedly kicked the tires on Rapid7, however The Info reported in July 2023 that Rapid7 and Thoma Bravo had been too far aside on value.

Then in August 2023, Rapid7 laid off 18% of its workforce – greater than 470 positions – to streamline administration layers, cut back position overlap and optimize its mixture of onshore and offshore expertise. The layoffs aimed to assist Rapid7 enhance its managed detection and response capabilities throughout all of safety operations (see: Rapid7 Lays Off 18% of Employees Amid Shift to MDR Services).

Rapid7’s income for the six months ended June 30, 2024, climbed to $413.1 million, up 10.6% from $373.6 million the 12 months prior. The corporate recorded web earnings to $10.5 million – or $0.14 per diluted share – up from a web lack of $92.7 million, or $1.54 per diluted share – within the first half of 2023.