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Which Type of IPO Should AVG Use?

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What type of IPO should AVG use - a traditional IPO or an online auction? Based on your analysis and findings, what would you recommend to the executives of AVG? Please explain your reasoning in detail.
To answer the above question, please include responses to the following issues together with other issues that you think are important:
-The type of investors AVG is likely to attract
-The lessons learned from Google and Morningstar from their auction IPOs
-Advantages of each type of IPO
-Costs of each type of IPO (e.g., US Securities and Exchange Commission fees, stock brokers' commission, other fees, etc., but how much? Please provide numbers and ratios in the paper.)
-Risks of each type of IPO

Solution Preview

AVG should use an auction IPO to sell its 4,000,000 shares. There will be a total of 9,200,000 shares sold. AVG will sell and receive income on 4,000,000 shares. Existing shareholders of AVG will 4,000,000 shares. The existing shareholders will profit from the sale. Also, the existing shareholders will give the underwriters (investment bankers) an option to purchase 1,200,000 shares to cover fees and allotments. The investment bankers must purchase the shares within 30 days. An auction IPO will allow AVG to earn more money for the business vs. a traditional IPO. The reason for additional money is the fees charged by the investment bankers.

AVG will attract technology investors interested in investing in a multinational company. AVG offers cutting edge security technology to protect personal computers from computer threats. The company is capable of adjusting to security threats on a daily basis. One of the key factors that will attract investors is AVG's employees (The information was obtained at 'Company Profile').

Let's examine Google's dutch auction IPO. Google set the IPO price at $85 per share. The stock price range was $85 to $95 per share. Google planned to sell 19.6 million shares. Google raised $1.2 billion in capital from the IPO. Google's share price rose 18 percent to $100.34 per share on the first day of trading. The trading price was improved by the venture capital backers such as: Kleiner Perkins Caufield & Byers and Sequoia Capital because the companies kept their stake to the company (The information was obtained at 'Google jumps 18% in debut'). Google views the auction IPO a success because Google wanted a larger number of investors to participate in the IPO. From a financial aspect, Google would view the auction IPO a success because more capital was raised because investment bankers charged lower fees. Finally, Google's stock price increased following the IPO, which gave the public ...

Solution Summary

The solution includes a discussion of the types of IPO and which one is suitable for the case at hand given a number of factors like investors, cost and risk. 1302 words with sources linked.