another article which i know you will find very interesting and might signal an uptrend for british net stocks:
Dow Jones Newswires -- October 21, 1999
DJ 365 Cautious On Timing Of GBP300M Float, UK Mkt Improves
By Anthony Dovkants
LONDON (Dow Jones)--After months of speculation, 365 Corporation PLC finally took the plunge and Thursday announced plans to brave the U.K.'s depressed Internet new issues market.
But tough times lie ahead before the listing.
The on-line and communications service is expected to fetch a market value of somewhere between GBP250 million and GBP300 million. This is already down on summer estimates of up to GBP500 million.
On top of this, Chief Executive Dan Thompson told Dow Jones Newswires that the listing date was yet to be decided and that the offering on the London Stock Exchange would come in the "near future".
And quite rightly so. 365 is looking for a lift in sentiment among the U.K.'s other Internet stocks; Freeserve PLC (FREE), QXL.com PLC (U.QXL) and eXchange Holdings PLC (U.EXH).
Just two weeks after listing, QXL.com, has fallen as much as 11% below its IPO price and Freeserve, the U.K.'s flagship on-line stock has been volatile, hitting a low of 135 pence and a high of 244 pence since its July listing. The U.K.'s most popular free on-line provider floated at 150 pence.
However, the recent gloom that has enveloped most U.K. new issues over the last three months could yet lift.
Software company EasyScreen PLC Thursday provided early signs of an improvement in the IPO market, when it rose as much as 28% on its debut, while gym operators LA Fitness PLC gained 19% on its first day of dealings. And telecommunications operator, Redstone Telecom PLC priced its stock at the top end of the range.
All good. But 365 faces a bigger hurdle of convincing U.K. investors to part with their money. So far, they have been less than enthusiastic about applying for shares in internet IPOs.
Take QXL. "A number of U.K. investors shied away from QXL. They are skeptical about the future of the Internet. It's the Americans who have kept that stock going," a London-based corporate banker said.
Thompson, however, believes 365 has the right formula to hook U.K. institutions. In a nutshell, the roadshow strategy for marketing the IPO will run along the following lines.
"We have to point to the results and the projections and demonstrate the business plan," Thompson said.
"We have to illustrate that internet revenues are high and costs are low. Also, we will tell them (investors) that we have an attractive business model once it has reached critical mass," he added.
For the three months ended June 30, 1999, 365 generated revenues of GBP4.4 million and posted an operating profit before interest, tax and goodwill amortization of GBP277,000.
The company provides content in areas such as sports and entertainment as well as offering communications services including fixed-line, internet and e-mail to small and medium-sized businesses. 365 was established to anticipate the convergence of digital technologies when consumers will be able to enjoy developments like Internet and e-mail access on mobile phones and television.
The company is backed by hi-tech investment boutique Durlacher PLC (U.DRL), which invested GBP100,000 in the communications group in 1997. Durlacher is also behind internet companies such Epoch Software, the on-line legal service provider and shop guide Focus Digital.
The investment group will be joint broker with Cazenove & Co. Durlacher will be joint lead manager, while Cazenove will act as bookrunning lead manager.
365 Can Take Heart From Improvement In U.K. New Issues
Despite the gloom, Thompson and Durlacher can take heart from the improvement in the new issues market during the latter part of this month, after September and early October were marked by the postponement of Regus Business Centres' GBP1 billion float and the cancellation of Bovis Group's IPO in favor of a better-priced trade sale at GBP285 million.
Among Thursday's new offerings on the London Stock Exchange, LA Fitness, a U.K. fitness chain, made a strong start. At 1407 GMT, shares were up 30.5 pence at 180.5 pence after listing at 150 pence. Explaining the popularity of the stock on its debut, one institutional investor in LA Fitness said, "The company is cheap."
The business, which started with an initial market value of GBP55 million, priced its shares last week and the offer was about two times oversubscribed. The group raised GBP15 million.
And EasyScreen took off on its debut. Shares were up 37.5 pence at 207.5 pence. The stock was placed at 170 pence.
"The stock wasn't hugely oversubscribed," an analyst said.
"But it's a tech stock and it's up partly because private investors weren't able to get into the offering until today."
"Investors are also buying because they are aware the company will grow very fast over the next few years," he added.
EasyScreen designs and markets software for financial institutions that trade on electronic derivatives exchanges.
And finally Redstone Telecom. As expected, the stock priced at the top end of its range at 120 pence. Shares were being offered between 100 pence and 120 pence.
The company will have a stock market value of GBP102.7 million. The IPO was six times oversubscribed.
A spokesman for Redstone said the company had planned to issue the full 32.4 million shares if the stock was priced at 100 pence. The company's goal was to raise GBP20 million in gross proceeds. However, the stock was priced at 120 pence, making it less necessary to issue the full number of shares, the spokesman added.
Redstone will place 30.8 million shares, which represents 35% of the total equity capital of 87.7 million shares.
Trading will begin Monday.
-By Anthony Dovkants;44-171-842-9272
anthony.dovkants@dowjones.com
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