What happened
For much of the day, things were quiet for shares of cybersecurity specialist SentinelOne (S 1.70%), as the stock only traded about 1% to 2% higher than where it opened. That was until about 1:15 p.m. ET when SentinelOne stock suddenly spiked higher. As of 3:10 p.m. ET, shares are up about 17% for the session.
The catalyst was an exclusive report from Reuters that says SentinelOne is exploring a sale.
So what
Since going public in 2021, SentinelOne has been a disappointing investment, with shares dropping more than 60%. Perhaps this is why shareholders are happy that the company might sell itself.
According to Reuters, SentinelOne's management has already hired an investment bank to advise it through the process. And it sounds like it's already spoken to some private equity firms.
Now what
I'm not sure the news is entirely good for SentinelOne's shareholders. Sources reportedly said that the potential takeover bids from outside parties aren't living up to management's hopes. In other words, it doesn't sound like anyone wants to pay up for SentinelOne.
This is particularly revealing considering the current valuation of SentinelOne stock -- it's cheap compared to its rivals. For example, top competitor CrowdStrike trades at a price-to-sales (P/S) valuation of about 15 whereas SentinelOne trades at a P/S of about 10.
The unconfirmed report about SentinelOne suggests that the company isn't attracting enough interest even at its lower valuation. Therefore, it's possible that a buyout wouldn't come at an overly attractive price for current shareholders.
However, all of this said, this is still an unconfirmed report for SentinelOne and investors don't have clarity regarding the details. Therefore, I don't believe investment decisions should be made from the Reuters report alone.
Expect SentinelOne's management to publicly comment and provide greater clarity when it reports financial results for the fiscal second quarter of 2024 on Aug. 31.
