The Index, Which Is Being Made Freely Available, Provides A Focused Measure of Investor Sentiment to The Cybersecurity Sector, One That Is Pure-Play, Broad-Based, And Provides Context
NEW YORK, Sept. 14, 2022 /PRNewswire/ — Option3, a specialist cybersecurity private equity firm that combines experience from the national security community with decades in investing, capital markets, and M&A, announced today that it has launched its proprietary Cyber TRUST™ Index to provide an unbiased, focused measure of investor sentiment towards the sector. Also referred to as Cyber TRUST™, the index tracks only companies that are pure-play cybersecurity, is broad based in weighting, and can provide further context by tracking “indicators” of smaller sub-groups.
Cyber TRUST™ owes its origins to internal valuation metrics maintained by Option3’s investment team. “We launched Option3 six years ago to invest exclusively in cybersecurity. While our investments were in pre-IPO companies, we followed the steady stream of IPOs to see what we could learn from the public market. As we hit a critical mass of publicly traded pure-play companies, we created our own internal index which gained in value with each IPO. While there is further information that is proprietary to our investment strategy, we have decided to make the index itself available to everyone,” said Option3 Managing Partner, Manish Thakur.
Cyber TRUST™ joins a small but growing set of cyber equity indices, most linked to ETFs. Starting at 100 on January 1, 2020, the index stands at 153 today, reflecting a sector seeing double digit growth, boosted by the uncertainties brought on by the remote working movement because of the Covid-19 pandemic, and more recently by Putin’s war in Ukraine.
Cyber TRUST™ tracks 18 large cyber stocks that Option3 classify as pure-play and is equally weighted among them with quarterly rebalancing. The index specifically excludes large, diversified companies that may have large cyber revenues but whose stocks do not trade on the basis of their cyber business. The index is being provided for informational purposes only and so not impacted by trading strategies designed to boost the performance of ETFs linked to it.
While not indices of themselves, the growing universe of cyber indicators reveal important trends within the industry. Indicators can be based on sub-sector or technology like cloud or endpoint security, geography (i.e., Israel, European indicators) or on the basis of the customer (i.e., govt-cyber companies). The dramatic differences between the various sub-sectors underscores the importance in factoring shifting sector dynamics, and the underlying threats driving them into investment decisions.
“Behind the high-level numbers, Cyber TRUST™ and its methodology provide us with a lot of market perspective,” said Option3 Associate, Vishal Gaglani. “So far in 2022, the overall index is down 21%. Among the indicators, cloud security is down even further at 30%, while government related cyber companies are actually up by 6%.”
Option3 is a specialist cybersecurity private equity firm based in New York and Reston, VA that combines experience from the classified world of U.S. national security with decades in investing in capital markets, and M&A. Since 2015, we have invested in 9 companies, largely through two portfolios, and are now “advance investing” out of our C2 fund. C2 departs from the venture strategies of most cyber funds, primarily seeking control positions in mid-market companies, leveraging our team’s prior C-suite operating experience. Option3’s investment priorities are governed by our longstanding Technology Board, which spans the former Chief Information Officer (CIO) of the CIA to the former CIO at the Department of Defense, and an Advisory Council led by a former CEO of Lehman Brothers. For more information, please visit www.option3.com.