Data breaches fueled valuations of cyber firms

Following major hacks, share prices in a new Cyber Index shot up.
Following major hacks, share prices in a new Cyber Index shot up.

Stoked by headlines announcing major data breaches, the stock valuations of cybersecurity companies outperformed the Nasdaq and S&P 500 by double over the past three years, according to Bessemer Venture Partners' new Cyber Index, released on Tuesday.

The Larchmont, N.Y.-based venture capital firm tracked the performance of 29 pure-play cybersecurity companies, including heavyweights like Palo Alto Networks, Symantec, F-Secure, VeriSign, Fortinet, Check Point and Gemalto, as well as smaller vendors like email security firm Zix and Mobileiron, a mobile security player.

Following major hacks, the Cyber Index share prices shot up. After the Anthem breach in February 2015, e.g., the index spiked 29 percent. After the Target breach, it rose 27 percent versus the Nasdaq's three percent and zero for the S&P.

David Cowan, head of BVP's cybersecurity practice, told Fortune that he expected an uptick in M&A activity as the companies his firm tracked "are basically selling obsolete products.” 

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