Thursday, July 12, 2012

Avast Files for $90 Million Initial Public Offering (IPO)

After first talking about going public in December, Avast filed an updated S-1   with the SEC (Securities Exchange Commission)  on July  12.  They’ll be trading on Nasdaq   under AVST.  The IPO (Initial Public Offering) will be for $90 million.  Anticipated offering price of the IPO, $9 to $11 per share.  The information in the S-1 lists  their installed base at about 159 million users.  The 190 million figures will probably be disappearing from their web site.  The definition resulting in 190 million may be different, however. When going IPO, accuracy in these docs is kind of importan. Legal people like that. 

Avast  may have wanted to go public earlier in the year.  The Facebook debacle temporarily  sucked the wind out of  the industry’s IPO sails.   The $90 million figure is down 55% from the $200 million figure that was floated earlier this year.  The bookrunners on the deal are   UBS Investment Bank, Deutsche Bank Securities, and Jefferies & Co.   

According to Renaissance Capital, by offering 9.0 million shares at a price range of $9.00 to $11.00, and at the midpoint of the proposed range, Avast Software will command a market value of $850 million.  IMHO, this sounds high.  AVG Technologies’ revenue run rate is approximately $300 million and with a more diversified revenue stream, they went public with a market capitalization of around $700 million.  Annualizing 2012 first quarter revenue of $27 million, and using a 5x multiple, gives a market cap of $540 million.  This is a crude methodology (first link at the bottom of this blog for details). Look for the pricing to result in a positive “pop”.  Facebook lost quite a few friends following the plunge in their stock following opening day.  Negative pops - bad. Unlike.

The Avast  updated S-1 filed with the SEC   can be viewed at the link below.  There must be an unwritten rule that S-1 documents have to run about 160 pages,  before attachments.  The Avast S-1 is  approximately the same length as the S-1 filed by Palo Alto Networks.  The risk factors run about 25 pages.

Like their   Prague/Netherlands based competitor, AVG Technologies, Avast will officially be headquartered in the Netherlands.  “We are incorporated under the laws of the Netherlands and on this basis are subject to Dutch tax laws as a Dutch resident taxpayer.  We believe that we are resident solely in the Netherlands for tax purposes and that we, and in certain cases, the holders of our shares, can rely on this position for purposes of the application of tax treaties concluded by the Netherlands with other jurisdictions.  Read “Double Irish with a Dutch Sandwich – Yummy Way For Corporations to Reduce Federal Taxes”.

Additional verbiage, probably standard for non US based companies listing on Nasdaq – “As a foreign private issuer whose shares are listed on the NASDAQ Global Select Market, we have elected to follow certain home country corporate governance practices instead of certain NASDAQ requirements.” “We do not comply with all the provisions of the Dutch Corporate Governance Code.  This may affect your rights as a stockholder.”  These are explained in detail in the S-1.

According the June   2012 “OPSWAT Report on Worldwide Security Industry Market Share Analysis”, Avast is number one in worldwide antivirus market share.  Also in the top 5, Microsoft, Eset, Symantec, and AVG Technologies 

The Avast  free product received 3 stars (out of 3) and finished tenth out of twenty in the March “On-demand Detection of Malicious Software” test done by AV- Comparatives .

Below is a snapshot of some of Avast’s financial data (revenue, income, etc.)  for the last several years (click on it to enlarge).  Like AVG, Avira, Microsoft, and PC Tools (somewhat quietly owned by Symantec),  Avast also uses a freemium model.

Avast has a corporate office just north of Silicon Valley in San Mateo, California.  A 20 mile hike to AT&T Ballpark,  for San Francisco Giants  baseball games.  AVG Technologies California employees?  They just have to walk across the street.  Very cool.

Don’t look for any of the Avast  officers or directors to be pictured wearing hoodies during the roadshow on the day they go  public.  The major stockholders are Eduard Kucera (30%), Pavel Baudis (30%), and Summit Partners (22.6%).  Let the public roadshow begin.  Hodně štěstí.  Pivo prosím.

For additional light reading:


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