Russian hacks weigh on private equity's software investments
Some of the world's biggest private equity firms, including Blackstone Group Inc, Silver Lake Partners LP, and Thoma Bravo LP, own major stakes in the software firms whose shares dived on news that they were breached by suspected Russian hackers.
Shares in SolarWinds Corp, which is controlled by Silver Lake and Thoma Bravo, were down more than 5% on Tuesday, after the information technology services provider said on Sunday that cyber spies hid malicious code in the body of legitimate software updates. SolarWind's stock has slid 20.8% from last week's close.
Reuters reported that Russian hackers hijacked the SolarWinds software updates to break into multiple U.S. government agencies. Moscow denied having any connection to the attacks.
Following the plunge in the shares, Silver Lake's nearly 40% stake in SolarWinds is worth $2.3 billion, while Thoma Bravo's 33% stake is valued at $1.9 billion. They are still in the black, as each had invested $1.2 billion in the $4.5 billion leveraged buyout of SolarWinds in 2016. Silver Lake and Thoma Bravo have also earned $194.6 million and $234.67 million, respectively, from secondary stock sales since they took SolarWinds public in 2018.
Silver Lake declined to comment. Thoma Bravo did not respond to a request for comment.
In November, Blackstone led a $400 million investment in cybersecurity firm FireEye Inc, with ClearSky, a cybersecurity-focused investment firm, joining as co-investor.
FireEye shares dropped more than 11% earlier this month after the company said hackers stole an arsenal of internal hacking tools used to privately test the cyber defenses of its clients. FireEye has contracts across the U.S. national security sector and other allied countries.
Following the breach, FireEye agreed to amend the deal to make it more favorable to Blackstone and ClearSky, according to regulatory filings. The FireEye preferred shares they stood to receive, paying a 4.5% dividend, would be converted into common stock at $17.25, not $18 as previously agreed. FireEye shares were trading on Tuesday afternoon around $13.58.
Blackstone declined to comment.
(Reporting by Chibuike Oguh in New York; Additional Reporting by Krystal Hu; Editing by Dan Grebler)