Jeff Bezos. Bill Gates. Larry Ellison. Mark Zuckerberg. Larry Page…
…and Pavel Baudis.
No, I had not heard of Mr Baudis either until I looked at Avast (AVST), a developer of anti-virus software.
SharePad confirms Mr Baudis owns 257 million Avast shares, which at the near-£5 share price values his stake at more than £1.2 billion:
Okay, not quite in Jeff’s league, but a tech billionaire nonetheless.
SharePad also shows fellow directors Eduard Kucera owning shares worth £500 million and Ondrej Vicek with shares worth £100 million.
Messers Baudis and Kucera are non-execs and co-founded what became Avast during the late 1980s. Their first project was writing a computer program to crack the Vienna virus:
Mr Vicek joined Avast in 1995 as a developer and has since risen through the ranks to become CEO.
I like how the main shareholders/directors have direct hands-on experience of what the employees do day-to-day. I am convinced such leadership makes a positive difference at companies. I also like how the CEO has waived his salary and annual bonus indefinitely:
Ondrej Vlcek, Avast CEO, has notified the Company’s Board of Directors of his intention to indefinitely waive his annual salary and bonus, and instead receive a nominal annual salary of US$ 1. He will continue to receive annual equity grants, as part of Avast’s long term incentive plan, calculated as a multiple of his (waived) base salary.
Mr Vlcek has also notified the Board of his intention to donate 100% of his Board director’s fee ($100,000 per annum) to charity. The initial recipient will be a UK based charity, Demelza Hospice for Children. All arrangements are effective from the date of Mr Vlcek’s appointment to the role of CEO on 1 July 2019.”
Not many CEOs given up their basic pay, although waiving what would have been a $700k salary is easier to do with a £100 million shareholding plus 5 million stock options.
Avast floated only in 2018, so the readily available financial history is somewhat limited. Nonetheless, SharePad shows some quality measures:
Forecasts show single-digit growth and the P/E could be around 19, which is not outrageous for a large-cap tech share in the current market:
Bear in mind the last results showed gross debt of almost $1 billion, which could distort the valuation. Adding back the debt to the £5.1 billion market cap gives approximately $7.6 billion, which lifts the possible multiple to 22.
- Based in the Czech Republic
- Made a sizeable acquisition in 2016 — could perform more
- Debt is not insignificant (almost 3x earnings)
The admission document is a good place to look for other risks.
The largest danger to me is Windows Defender. If this built-in anti-virus scanner is beefed up by Microsoft, why would anyone pay for Avast’s software?
Something I did not think of is the PC replacement cycle, and customers not renewing their software:
And (presumably low cost) “viral marketing” might explain the high margins, although such marketing may not be what a FTSE 100 business should now be dependent on:
I have no special insight into Avast beyond the above, but I do like management’s background and the general idea that a billionaire is not going to put his/her wealth at great risk — which ought to protect smaller investors.
What does the forum think?