Cybersecurity Firm Rapid 7 Pops on First Day of Trading

With high-profile data breaches becoming the norm, it is a good time to own a cybersecurity firm.

At least that is the logic Rapid 7 Inc. seems to be capitalizing on. The company priced its initial public offering Thursday night at $16 per share, above expectations. Shares of Rapid 7 jumped 54% in their market debut on Friday, reaching $24.66 in afternoon trading.

Based on the trading, Rapid 7's market cap stood at $938.58 million. That compares to fellow cybersecurity firm Qualys Inc.'s market capitalization of $1.25 billion.

Rapid 7 Inc. develops and sells licensed software and cloud-based software services to businesses to protect them against security attacks.

It is a hot business to be in.

Shares of already-public cybersecurity companies have been on a tear so far this year. The PureFunds ISE Cyber Security ETF is up 20% year to date, far outpacing the broader market. In the same period the S&P 500 has risen 3% and the Nasdaq Composite Index is up 8.7%.

Recent security breaches, such as the ones that hit Target Corp. and the U.S. Office of Personnel Management, have drawn investor interest in these companies.

Technology-research firm Gartner Inc. expects information-security spending to rise 7.1% from a year earlier in 2015. But like with any highflying area of the market, there are risks, analysts warn, which include the possibility that cybersecurity shares could face big declines and heavy volatility.

There are also plenty of competitors, including Qualys and Intel Corp.-owned McAfee, among others.

Rapid 7 is trading on the Nasdaq Global Market under the symbol "RPD." Morgan Stanley and Barclays are leading the deal.

Rapid 7 has granted the underwriters a 30-day option to purchase up to an additional 967,500 shares to cover overallotments, if any.

Also, entities affiliated with private-equity firm Technology Crossover Ventures, a partial owner of the company, agreed to purchase $5 million of Rapid 7's stock in a private placement at the price of the IPO, the company said in a regulatory filing.

Deborah Gage contributed to this article.

Write to Corrie Driebusch at [e-mail]

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