Avast ye! Putting a brake on CEE tech IPOs

By bne IntelliNews July 27, 2012

Nicholas Watson in Prague -

Avast Software's decision to pull its Nasdaq IPO just days before it was due to be priced is a blow to those who had hoped the international offerings from AVG Technologies and EPAM Systems earlier this year signalled a new foreign investor interest in Emerging Europe's fast-growing technology companies.

As bne first reported on July 26, the anti-virus software provider Avast postponed its IPO due to what a spokeswoman described as the "overall bad market conditions." Avast had been expected to issue 9m shares, which if priced at the mid-point of the $9-11 per share range, would have raised $90m and valued the Dutch-based company - though like AVG it has its roots in the Czech Republic - at €846m.

Certainly, the recent rise in turmoil on European markets over rising worries about the economic situation in Greece and Spain sounded the death knell for the planned US IPOs by Avast as well as several others, such as Manchester United and Fender the guitar maker.

However, in truth the equity markets have been souring for some time on IPOs from tech companies out of Central and Eastern Europe. AVG, which listed on the New York Stock Exchange in February, has seen its shares fall 37.5% below their IPO price, while the shares of EPAM, which also listed on the NYSE the same month, are back to near where they listed at after having fallen about 65% from their post-IPO peak.

In May, the planned IPOs from Russian mobile phone operator Megafon and the country's largest social network Vkontakte were both postponed. Megafon blamed the delay of its listing from July to September on poor market conditions (though many wonder question if that's realistic), while Vkontakte - often called the "Russian Facebook" - said the debacle surrounding the US social media giant's own IPO damaged its prospects.

"The Facebook IPO destroyed the faith of many private investors so [Vkontakte's] IPO is postponed for an indefinite term," Vkontakte founder Pavel Durov wrote on his Twitter page.

J.R. Smith, CEO of AVG Technologies, says 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."

"By the time these tech companies are ready to be acquired or acquire, they will be able to take the next step for their growth, as hopefully some of today's turmoil will have past," Smith adds.

However, as Smith and others note, there will still be venture capital available for good companies with strong business models and revenues, as such investors are looking at a longer-term horizon for these investments.

According to Fast Lane Ventures, a Russian developer and incubator of internet companies, there were 59 deals in the Russian internet market in 2010, raising a total of $225 million; by 2011, the number of transactions had increased to 215, raising $540 million. However, even this is a probably an underestimate.

"The Russian internet market continues to be opaque," Andrey Kulikov, senior investment analyst at Fast Lane Ventures, said in a June research report on the financing of Russian internet companies and start-ups between 2010 and 2011. "We are aware of at least 100-150 seed investments completed by businesses and non-public holdings, and 20-30 major investments whose financial information is completely closed."

Taking into account these hidden deals, Fast Lane Ventures estimates the total investment volume in Russian internet companies and start-ups at approximately $500 million in 2010 and $1 billion in 2011.

Related Articles

Drum rolls in the great disappearing act of Russia's banks

Jason Corcoran in Moscow - Russian banks are disappearing at the fastest rate ever as the country's deepening recession makes it easier for the central bank to expose money laundering, dodgy lending ... more

Kremlin: No evidence in Olympic doping allegations against Russia

bne IntelliNews - The Kremlin supported by national sports authorities has brushed aside "groundless" allegations of a mass doping scam involving Russian athletes after the World Anti-Doping Agency ... more

PROFILE: Day of reckoning comes for eccentric owner of Russian bank Uralsib

Jason Corcoran in Moscow - Revelations and mysticism may have been the stock-in-trade of Nikolai Tsvetkov’s management style, but ultimately they didn’t help him to hold on to his ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss