Avast Thursday Initial Public Offering Postponed

 From the Original Post - Updates at End of Blog

Antivirus software company Avast will have their Initial Public Offering (IPO) Thursday.  The ticker symbol will be AVST. The roadshow is about at an end! Palo Alto Networks' successful IPO Friday suggests that the IPO  market may be open again.

Avast plans to offer 9 million shares at between $9 and $11 each with this IPO. The price  may be tweaked on Wednesday. The lead underwriters for the IPO are UBS Investment Bank, Deutsche Bank Securities and Jefferies & Co.  Avast uses the freemium strategy for their antivirus software. Avast  develops anti-virus software, specializing in a free version of its product used by consumers. They then offer  upgrades that can be purchased.  Avast is number one in OPSWAT’s most recent world wide industry market share analysis for antivirus software. www.opswat.com

 

James Krapfel of Morningstar said Avast is going public at a time when “the company’s software is installed on 20% of the worldwide consumer and small business PCs.” Krapfel called Avast “a higher quality peer” to rival AVG Technologies AVG  with sales growing at twice AVG’s annual rate.

  

Below is a summary of some of their financial data, revenue, income, etc. Click on it to enlarge.

Avast’s freemium competitors include Avira, AVG Technologies, PC Tools, and Panda.  Microsoft offers a free version of antivirus but no paid versions.  The Avast current installed base in about 159 million. They most recently had 1.72 million downloads on www.download.cnet.com   last week.  

 July 29 updates - Avast was the most popular free  antivirus download on CNET  for the week ending July 29, with 1.69 million downloads.


Updates


 July 30 update - Avast was the most downloaded free AV product on download.com for the week ending July 29 with 1.69 million downloads.

July 25 update - Avast Software  postponed its IPO on Wednesday evening, citing poor conditions. 

AVG Technologies executive JR Smith told  the Financial Times on Thursday that the  IPO situation for CEE tech companies is likely to get worse before it gets any better. “We are a European software company and we are pretty close to what is going on here, and start-ups and those companies looking for additional capital investment will find it tougher for sure over the next 12 to 18 months.”

The Avast  S-1 filed with the SEC   can be viewed at the link below.   Informative reading.

http://www.sec.gov/Archives/edgar/data/1537133/000104746912007168/a2210121zf-1a.htm

 

For more information, go to

http://kensek.blogspot.com/2012/07/avast-files-for-90-million-initial.html

 

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.

http://www.sec.gov/Archives/edgar/data/1537133/000104746912007168/a2210121zf-1a.htm

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”.   http://kensek.blogspot.com/2012/04/double-irish-with-dutch-sandwich-yummy.html

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 

 http://kensek.blogspot.com/2012/06/june-2012-opswat-report-on-worldwide.html .   

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  www.av-comparatives.org .

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:

http://kensek.blogspot.com/2012/01/what-would-avast-softwares-valuation-be.html

http://kensek.blogspot.com/2012/05/avast-gradually-moving-forward-with-ipo.html

 

 http://kensek.blogspot.com/2011/12/avast-software-files-for-200-million.html
 

http://kensek.blogspot.com/2012/03/march-2012-opswat-report-on-worldwide.html

July 18 - Palo Alto Networks To Go Public Friday

July 18 addendum -  Palo Alto now expects to charge $38 to $40 a share in its public debut, up from the previously stated range of $34 to $37, according to an updated regulatory filing uploaded Tuesday evening. They expect  to establish a final price for the shares Thursday night and debut in public trading Friday.  A positive way to look at this.  The offering may be way oversubscribed. A negative way. Isn't this what Facebook did? Didn't the Facebook investors  get burned?  Proceeds may be up to $250 million.  A link to the most current S-1 is below.

July 14 addendum -  Venture capital firms Greylock Partners and Sequoia Capital will each hold 20.7% of the company after the IPO (Initial Public Offering), and Globespan Capital Partners will hold 7.4%.  They'll be listing as PANW.  The offering is scheduled to price on July 19, according to Bloomberg.

  They may try to raise as much as $229 million.  The initial anticipated price range, $34 to $37. This may help start up IPO activity again.   The IPO will take place on the NYSE. At the top of this pricing, they will  have a market capitalization of $2.5 billion. 

Firms leading the Palo Alto Networks IPO offering – primary lead is Morgan Stanley.  Others include Goldman Sachs, Citigroup Global Markets, Credit Suisse Securities, Barclays Capital, UBS Securities, and Raymond James. Palo Alto Networks filed their S-1 in April, reporting a loss of $12.5 million for the fiscal year ended July 31.  This is compared with a $21.1 million loss a year earlier.  Revenue had more than doubled to $118.6 million.  In a June filing, Palo Alto Networks  reported that third quarter sales for the three months ended in April rebounded to $65.7 million, for a 16% increase.  

To view the S-1, go to the link below.  The S-1 is about 160 pages of light reading. The S-1 is the amended July 17 version.
 
http://www.sec.gov/Archives/edgar/data/1327567/000119312512304885/d318373ds1a.htm

When Palo Alto Networks filed on April 6,  the  valuation of the IPO was for $175 million.  Unlike the Facebook IPO that had Zuckerberg owning roughly a gazillion shares and a major portion of the company, Palo Alto Networks founder   and Chief Technology Officer Nir Zuk owns 6.2% of  the Palo Alto Network shares. 

Palo Alto Networks and Check Point Software Technologies are the only two companies in the Leader portion 2011 Gartner Magic Quadrant for Enterprise Firewalls.

The patent infringement lawsuit file by Juniper against Palo Alto Networks late last year is still going on.

After the Facebook implosion, look for this to be  a reasonably priced IPO, with a reasonable pop.  Don’t put your money on an NYSE meltdown like the one Nasdaq had with Facebook.  Perhaps it was all the stress over Zuckerberg’s wedding that occurred shortly after the IPO.

Meanwhile, on the chest thumping front,    “Is Check Point's firewall really faster and cheaper?  Can they really see all apps on all ports?  Or even identify unknown traffic?”  Go to http://www.paloaltonetworks.com/cam/techbusters/  to view Palo Alto Networks’ video take on the situation. 

Is Facebook Really Worth $96 Billion in an IPO?

Facebook will be taking their IPO (Initial Public Offering) show on the road next week.  They’ll be visiting investment firms and banks to talk up the IPO and the figures developed by their “smartest guys in the room”.  Of course, these companies will be having their own smartest guys in the room listening to the pitch, looking at the numbers and trying to see if it makes sense.  Also, markets aren’t always rational.  Despite what the numbers say, when too many people are chasing too few shares and irrationality takes over, or when an IPO is priced  incorrectly, there could be a sizeable positive pop.

Moreover, blips in Q1 results are making some people nervous.  Q1 revenue was up 45% versus last year to $1.06 billion while net profit decreased 32% to $205 million.  Revenue growth in Q1 was up only slightly over Q4 2011. These are  not good things.  Other activities that have raised some concerns:

• Facebook agreed to pay $1 billion for Instagram, a company that makes it easy to share photos
• Facebook paid $550 million for patents filed by AOL and owned by Microsoft
• Facebook in March was hit with a lawsuit in March filed by Yahoo that alleged that Facebook   infringed on 10 Yahoo patents.  There are now 16 on the list. 

The figures Facebook filed with the US Securities Exchange Commission is to have an initial stock price   of $28 to $35 per share.  This would equate to a valuation of $70 billion to $88 billion. 

Sam Hamadeh of PrivCo thinks the IPO price will be between $38 and $40 per share.  "Facebook will mostly be given the benefit of the doubt ... but they still have a lot to prove," Hamadeh said.  "Especially after big IPO investors have been badly burned buying into the IPOs of Zillow, Groupon, and Zynga, all of which are trading well below their IPO prices.  They don't want to get burned again."

GreenCrest Capital’s Max Wolf believes that the financial numbers suggest a value of $60 billion.  This is 37%   less than the $96 billion Facebook is thinking of. 

Should Facebook go public at $28 share, initial investors like hi  tech investment fund FirstHand Capital would suffer an immediate paper loss.  They had purchased shares at $31 to $32 dollars and can’t sell their shares for six months after the IPO. 

BIA Kelsey’s Jed Williams stated that revenue would have to grow 41% annually over the next five years to justify Facebook’s   numbers.  This would suggest revenue almost 460% larger at the end of year five.

Morningstar believes that Facebook’s revenue would have to increase from 2011’s $3.7 billion with profit margins of 27% to $40 billion over the next six to seven years to justify the $96 billion valuation at time of initial public offering. 

According to Bloomberg - “Facebook is betting its growth prospects will persuade investors to pay 99 times earnings for its initial public offering, a higher multiple than 99 percent of companies in the Standard & Poor’s 500 Index.”

At the low end of the IPO range, Anup Srivastava, an assistant professor of accounting information and management, Kellogg School of Management has a base case scenario of $25 billion.  “This is based on the firm’s revenues reaching approximately $21 billion in ten years’ time from approximately $4 billion today, and the firm maintaining a high return on assets of approximately 20 percent.”

Different smartest guys in the room.  Different assumptions and models.  Different numbers.  And people are still trying to figure out how to value advertising revenue on mobile devices. The roadshow begins Monday.  Less than two weeks and then the IPO fun begins. I

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2012/05/03/BU3L1OD101.DTL#ixzz1twf3ZXjg

 

http://kensek.blogspot.com/2012/02/is-facebook-really-worth-100-billion-in.html