Monday, February 06, 2012

AVG Technologies Goes Public With Their IPO on NYSE

AVG Technologies' two year (?) trek to go public occurred on the New York Stock Exchange (NYSE) on February 1. For a while, the street had the IPO taking place on the London or Warsaw Stock Exchange. The planned opening Thursday morning on the NYSE was to be somewhere in the range of $16-18 US. Instead, it opened slightly lower and closed at $13.00 on Thursday for a 19% drop. Friday’s close was $13.09. A negative first day pop is never the objective. A positive pop rewards the initial investors, generates buzz, etc.

The three lead underwriters for the IPO (Initial Public Offering) were Morgan Stanley, J.P. Morgan and Goldman Sachs. Those underwriters will also be leading the Facebook IPO.

First Day Press on the IPO (some of the links may have changed)

Financial Times - AVG: not feeling the love - Shares in Czech anti-virus software firm AVG tank in NYSE debut, despite solid fundamentals

NY Times - Facebook I.P.O. Lifts Some Tech Stocks

Forbes - IPOs: Let's Hope Facebook’s Deal Goes Better than AVG's

Deal Pipeline- AVG IPO gets no Facebook boost

Reuters - AVG Tech shares crash on market debut. This headline was later amended to AVG Tech shares fall on market debut

What Happened?

That’s probably being asked in Prague and Amsterdam. Doing a valuation and pricing a private company for an IPO is an inexact science. Market conditions have changed (actually for the better over the last few months). The “guys in the room” may have been overly optimistic in their forecasts they used to generate their valuation of AVG and then back calculating to $16-18 dollar price. Buyers may be sitting back. It’s a positive sign that the original investors sold only a portion of their stock.

One article mentioned that at the offering price, AVG's price-to-earnings ratio was about 15. The writer stated that this made the shares more costly than those of Symantec, whose shares trade at a P-E ratio of about 11. This isn’t a completely fair comparison. Symantec isn’t s a pure security play given that they own VeriSign. Symantec’s mix of business and consumer security software is different. They have a broader overall security portfolio. They also sell security appliances. Hardware security firms tend to have lower multiples.

AVG Technologies Has Relatively Solid Products

• AV- Test - They came in sixth out of 23 in Av –Tests’s Q4 testing. Kaspersky topped this test.
• VB100 (Virus Bulletin, ) - AVG was 5 for 6 in receiving VB100 awards during 2011 for tests they were in.
• AV-Comparatives – (1) AVG Technologies was 11th in av-comparatives August-December “Whole Product “Real World” Dynamic Protection Test”. Symantec topped this one. (2) AVG received 2 stars out of 3 and finished 14th out of 18 in the “On Demand Detection of Malicious Software Test”. Kaspersky won av-comparative’s Product of the Year award.
• PC Magazine - They scored 3.0 stars out of 5 in PC Magazine’s Internet Security Suites 2012 testing. Symantec topped this test with 4.5 stars.
• PC World – They scored 4.0 stars out of 5 along with 7 other companies in PC World’s Best Internet Security Suites 2012 reviews. G Data topped this testing with 4.5 stars.

Now that AVG Technologies has gone public, there will be more visibility into the company. More "numbers"will be available for analysts and the public to view - where revenues are coming from, margins, financing, banking, and all that good stuff. More visibility will be given to projections (with the caveats that all public firms make). Analysts may look at churn, which is about 50%, based on AVG’s installed based of just over 100 million users and over 50 million downloads annually on .

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