It’s been a bumpy few weeks in web world, particularly for those
who have invested in Freeserve or Exchange Holdings stock, the first two
UK internet businesses to float on the London Stock Exchange.
If you were among those who put money into the companies, you would have
been dismayed to watch both stocks nosedive below their offer price.
Freeserve shares, particularly, went into freefall, hitting a low of
137p - quite a dip, considering the shares had a pre-float high of
For Freeserve, the fall came amid speculation that its first quarter
results were going to be a disappointment. In the end, it reported a
pounds 3.4 million turnover on losses of pounds 5.2 million. Turnover
was lower than predicted but the loss was also below expectations.
The drop is about as explainable as the money markets in general. The
word ’jitters’ was bandied about a lot, which does seem the most
It’s all familiar stuff for those of us who have been watching the
rollercoaster ride on the other side of the Atlantic, where internet
share prices have, in recent times, lost large amounts of their worth.
That said, they are, in general, still highly valued.
But since the Freeserve fall, The Sunday Times published its first
survey of its top 100 e-millionaires. This shows, more than anything
else, how healthy the internet business is becoming in the UK.
It might not all be British, but it is a truly vibrant scene. There are
bright, entrepreneurial ideas fizzing and the venture capital is finally
This brings with it a new confidence, but a new realism as well. In the
coming weeks, we will see a number of internet start-ups come to the
These will include the over-subscribed auction house, QXL, and
Lastminute.com, the darling of the start-ups.
There’s even more to come. People are already looking out for the likes
of 365 Corporation (whose Danny Kelly is profiled, right),
Thinknatural.com, icollector, jungle.com and peoplesound.com, among
What most of these companies have in common is they are first with a
very good idea that venture capitalists are prepared to invest in.
But it is this very fact that gets overlooked when people talk about the
over-valuation of internet shares in the fearsome terms of a
computerised South Sea Bubble. Sweeping - and damaging - generalisations
are made about the whole market as unfocused fears about the industry
are played out, with little thought given to the nature of the companies
It seems likely that in each sector there will be one or two killer app
companies. Freeserve is likely to be one of those, backed as it is by a
strong retail network and a strategy of buying up rivals to bolster its
service and appeal. Appreciation of this seems to have returned and its
shares have moved back above their offer price, moving towards a more
sensible 170p or so.
Sure, there will be failures - investment is always a risk - but there
will be many successes also. So let’s hope for a little more sobriety
before the next bout of jitters sets in.
Edited by Gordon MacMillan Tel: 0181-267 4904 E-mail:
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