NortonLifeLock Inc. (NLOK) dropped more than 12% on Wednesday after the U.K.'s Competition and Markets Authority (CMA) announced its intent to begin phase 2 investigations regardingNorton's proposed merger with Avast, a rival cybersecurity company.
The deal, worth between $8.1 billion and $8.6 billion, was supposed to close in February, but to go through, it needed approval from both Spain (which it received) and the U.K. It is now likely to be delayed another several months, and may not conclude until fall, at the earliest.
Currently, 206 ETFs hold NLOK shares.
The Global X Cybersecurity ETF (BUG) has the greatest exposure to NLOK, at 5.74%; followed by the TrueShares Low Volatility Equity Income ETF (DIVZ), with 4.03%.
From there, percentages drop off slightly, with the ETFMG Prime Cyber Security ETF (HACK) at 2.61%, followed by the ASYMshares ASYMmetric S&P 500 ETF (ASPY), at 2.34%; and the First Trust US Equity Dividend Select ETF (RNDV), at 2.20%.
BUG and HACK have seen the greatest 30-day percentage changes as holders of NLOK, at 7.83% and 3.99%, respectively.
A total of 64.3 million shares of NortonLifeLock are held in exchange-traded funds, comprising roughly 11% of the total outstanding shares.
The top five ETFs with the most NLOK shares overall are not the funds with the most significant exposure but large, broad-based ETFs.
The SPDR S&P 500 ETF Trust (SPY) holds 6.24 million shares, while the iShares Core S&P 500 ETF (IVV) and the Vanguard S&P 500 ETF (VOO), which both track the same index as SPY, hold 4.97 million and 4.01 million shares, respectively.
Interestingly, despite the S&P 500 Index being known as a mostly large cap benchmark, the Vanguard Mid-Cap ETF (VO) holds 4.19 million shares of the stock. Meanwhile, the Vanguard Total Stock Market ETF (VTI) holds 3.38 million shares.
Cap-weighted ETFs are the top strategy holding Norton shares, with 45 funds, but multifactor ETFs and active management ETFs are also involved, with those funds holding NLOK numbering 34 and 27, respectively. ESG ETFs represent 21 funds and fundamental ETFs represent 18 funds, rounding out the top five.
About The Company
NortonLifeLock announced in August 2021 its plans to merge with Avast, a Czech software company. In its initial release, the companies said the merger "has compelling strategic logic and represents an attractive opportunity to create a new, industry leading consumer Cyber Safety business."
“With this combination, we can strengthen our cyber safety platform and make it available to more than 500 million users,” said Norton CEO Vincent Pilette, when the deal was announced.
NortonLifeLock's products primarily focus on internet identity protection, whereas Avast's products aim to ward off viruses, phishing scams and other spam threats.
Although Avast's headquarters is located in Prague, it trades on the London Stock Exchange. The CMA launched a phase 1 probe into the more than $8 billion cash-plus-stock deal in January and had until March 16 to announce its findings.
The CMA said that both companies are industry leaders in the cybersecurity field and that a merger could potentially reduce competition in the cyber safety software market of the future.
"Unless the companies can offer a clear-cut solution to address our concerns, we intend to carry out an in-depth phase 2 investigation," said CMA Executive Director David Stewart.
NortonLifeLock and Avast now have five days to submit a proposal to appease those concerns.
However, in response to the investigation, NortonLifeLock was quick to call the CMA's announcement "surprising" and said it doesn't plan to make any phase 1 remedies.