Mike Lynch lands £300m mid-trail pay day with sale of AI cybersecurity firm

Controversial tech entrepreneur Mike Lynch and his family are in line for an almost £300m (€350m) pay-day even as he is on trial in the US over what prosecutors claim was the “biggest fraud in the history of Silicon Valley”.

Mr Lynch disputes the fraud claims against him and is defending himself in court against the charges which relate to his sale of Autonomy Software to Hewlett Packard for almost $12bn in 2011.

Meanwhile, Darktrace Plc, a UK-based cybersecurity company Mr Lynch co-founded after the Autonomy sale, is being snapped up for €5.32bn by US private equity firm Thoma Bravo.

While he is no longer directly involved in running Darktrace he is a substantial shareholder. The sale announced on Friday values the estimated 7pc of Darktrace owned by Mr Lynch and his wife and co-founder, Angela Bacares, at around £300m.

Mr Lynch has even used some of the stock as security for $50m of the $100m bail he had to post to stay out of jail while the US fraud trail against him goes ahead in San Francisco.

US private equity investor Thoma Bravo previously abandoned talks to buy Darktrace in 2022 but interest in AI technologies has soared over the past year after OpenAI launched its ChatGPT products and kickstarted an investor frenzy.

Darktrace was founded in Cambridge, England, in 2013 and uses artificial intelligence to identify hacks and suspicious data leaks.

Its founding investor was Invoke Capital Partners, the investment firm created by Mr Lynch after he left Autonomy. A number of former Autonomy executives were among its co-founders and earliest hires, including Darktrace CEO Poppy Gustafsson.

The bid is a blow to traders who had ‘shorted’ Darktrace stock ahead of the offer, betting shares would fall, attempting to draw comparisons to Autonomy. The stock shot up almost 30pc on Friday after the Thoma Bravo announcement.

Mr Lynch and his wife directly own a combined 48.1 million shares of Darktrace, which would be valued at about £298.2m in the deal, according to data compiled by Bloomberg.

Investors representing approximately 14.4pc of Darktrace’s shares have already agreed to the Thoma Bravo deal, the companies said.

The private equity firm will need to win over 75pc of shares for the deal to go through. The companies expect the takeover to be completed in the third or fourth quarter of the year.

Earlier this month another AI venture backed by Mr Lynch, legal-tech firm Luminance, raised $40m (€37m) in a new funding round. Luminance said the US case against Mr Lynch hadn’t created uncertainty for it and that he has no day-to-day involvement in the running of the company.

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