Shares of network security company FireEye (NASDAQ:FEYE) are up nearly 11.5% on Thursday after new speculation about a possible takeover, as well as the widely publicized DNC hacks bringing cybersecurity into the national spotlight once again.
FireEye has been the subject of takeover rumors for some time now, and although there doesn’t seem to be any new reports right now, today’s price action has investors talking once again. At Wednesday’s closing price of $16.49, shares were down over 83% from an all-time high of $97.35 reached in March of 2014.
According to a Bloomberg report from June, FireEye has recently rebuffed two separate buyout offers, including one from Symantec Corp. (NASDAQ:SYMC) . Despite shares trading near their 52-week low of $11.35, FireEye apparently felt that both offers were too low. Symantec would later go on to boost its cybersecurity suite by purchasing Blue Coat Inc. for $4.65 billion.
As Symantec’s purchase of Blue Coat shows, companies are looking to add to their cybersecurity portfolios for the right price. With FireEye’s market cap taking such a hit over the last two years, it comes as no surprise that the company would be one of the biggest takeover targets in the industry.
Moreover, FireEye and other cybersecurity companies tend to trade higher when there are national cybersecurity scandals. The public tends to be surprised when major organizations get hacked, and that puts the spotlight on companies like FireEye and the services that prevent these hacks.
The “hack-of-the-week” centers on the Democratic National Committee (DNC), which is currently the subject of a massive email leak that shows coordination between top DNC officials and the Clinton campaign. Long story short, political parties are typically supposed to remain neutral during the primaries, and that didn’t happen.
The reason cybersecurity stocks sometimes benefit from these scandals is the chain reaction that can often come from them. If I’m an executive at a major organization or company without a strong security plan, I’m a little bit worried that something as big as the Democratic Party is vulnerable to a hack.
In reality, hacks happen all the time. Federal agencies and important individuals are always the targets of attacks, and you have to be prepared before you become the victim. The cost of solid protection is much less than the costs associated with a massive hack, and that’s where companies like FireEye get their business.
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