From what we hear, investors won’t have to wait anywhere close to another two years for an IPO by an information security vendor. In fact, a pair of companies is set to put in their paperwork, with at least one prospectus possibly filed yet this year. Those offerings would follow last week’s strong debut of Imperva, which was the first IPO in the information security sector since Fortinet hit the market in November 2009.
Since then, however, a half-dozen other security providers that we might have expected to go public – both those formally on file, as well as ones in the "shadow" pipeline – have been snapped up in trade sales or have scrapped IPO plans. So which companies are likely to make it through the ongoing wave of consolidation and actually hit the public market?
Several sources have indicated that both AVG Technologies and AVAST Software have picked their underwriting teams and should be filing prospectuses in the coming weeks. In addition to similar timing on their IPOs, the two companies actually have a fair number of traits in common: both trace their roots back more than 20 years to Prague, and both are primarily known for their "freemium" antivirus offering. Additionally, both AVG and AVAST boast that their products have been downloaded more than 100 million times.
Assuming AVG and AVAST do indeed file and come public, they will likely benefit from two key trends on Wall Street. First, there is a clear demand among investors for security companies. Consider the fact that they are valuing Imperva at a rather rich level of nearly seven times 2011 sales, with Fortinet commanding an even higher valuation.
Second, there has been a notable shift toward the "consumerization" of IPOs. Tech vendors that have debuted so far this year such as LinkedIn (LNKD), Pandora Media (P), HomeAway (AWAY), Zillow (Z) and, of course, Groupon (GRPN) have not only dominated headlines, they have also raised significantly more money in their offerings than pure enterprise offerings. Most notably, Groupon raised $700m in its hotly debated IPO. But LinkedIn also raised $400m and Pandora raised $240m, which is more than twice the amount Imperva garnered in its offering, for instance.