By Echo Wang and Milana Vinn

NEW YORK (Reuters) -Cybersecurity firm Netskope has hired Morgan Stanley to lead preparations for a U.S. initial public offering that could raise more than $500 million, according to people familiar with the matter.

Netskope is aiming to go public as early as the third quarter of this year, two of the sources said, with one of them and two further sources indicating the IPO could value the company at more than $5 billion.

All the sources cautioned that factors including timing, valuation, and the amount the offering would raise are subject to market conditions. They also spoke on condition of anonymity to discuss confidential deliberations.

Netskope did not respond to a comment request. Morgan Stanley declined to comment.

Founded in 2012, Netskope provides cloud-based security software that helps companies protect apps, websites, and data from cyber threats. It competes with companies such as Rubrik Inc and Zscaler Inc.

Santa Clara, California-based Netskope has been backed by investors including Morgan Stanley Tactical Value, CPP Investments, Goldman Sachs Asset Management, and the Ontario Teachers' Pension Plan.

It was valued at $7.5 billion in 2021, although valuations of technology startups have broadly dropped since then.

Among Netskope's clients include retailer Ross Stores Inc and Yamaha, according to its website.

Chief Executive Sanjay Beri told Reuters in June 2024 that the company had been making internal preparations for an IPO, and going public would help grow awareness of its brand.

Expectations for a strong rebound in U.S. IPO activity this year have been tempered by geopolitical tensions and economic uncertainty, including tariff-related concerns. Still, signs of market stabilization in recent weeks have offered companies and their advisers encouragement of a more robust IPO pipeline for the remainder of the year.

Fintech firm Chime and trading platform eToro, which had postponed their IPOs amid market volatility triggered by new tariffs in April, have since moved forward with their listing plans.

Meanwhile, shares of cybersecurity peer Rubrik have surged nearly 200% since their debut in April, boosting investor interest in the sector.

(Reporting by Echo Wang and Milana Vinn in New YorkEditing by Nick Zieminski)