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To: Blue On Black who wrote (2355)	7/26/1999 11:05:00 AM
From: Jeffrey D	Respond to of 3519

Bundeep, Bloomberg and Freeserve. Jeff Dixons' Freeserve Shares Soar in First Trading, After Pricing At 150 pence By Bundeep S. Rangar and Kate Norton Freeserve Shares Surge on First Day of Trading (Update3) (Adds opening share price in 1st, 2nd paragraphs.) London, July 26 (Bloomberg) -- Freeserve shares surged as much as 48 percent on the first day of trading for the U.K.'s largest Internet service provider less than a year after it was created by Dixons Group Plc, the U.K.'s top electronics retailer. Its shares rose as much as 72 pence to 222p ($3.54) from the issue price of 150 pence ($2.39) each. At 222p, the unprofitable London-based Freeserve has a value of 2.24 billion pounds. The shares were priced at the top end of the range used to canvass investor interest in the offering. Dixons, which will retain an 80 percent stake after the offering, sold 63 million shares, while Freeserve issued 90 million new shares. A further 22.9 million shares will be sold if demand warrants. Since it was founded last year as one of the U.K.'s first free Internet providers, Freeserve has leapfrogged America Online Inc. to grab a third of Britain's Internet access market, set to be worth $1.9 billion by 2003. While investors sought more than 30 times the shares available, some analysts said the euphoria may not last as rivals, including AOL, offer free services. In trading before the market opened, the shares were offered for as much as 237.5p. However, no transactions were registered at the time. Dixons shares fell as much as 77 pence, or 5.72 percent, to 1,269p. ''The stock will do well in the next few days but management will need to find a way to justify these values,'' said Miles Saltiel, an analyst at WestLB Panmure Gordon. ''Competition is intensifying on a very broad front.'' Facing increasing competition from the likes of AOL -- which will start its own free service next month -- Microsoft Corp., British Telecommunications Plc and a host of banks, retailers and media companies that set up similar services, Freeserve is betting the cash from the sale will bolster its Internet commerce business. The company will gain 135 million pounds from the sale. The U.K. market for trading goods and services online will expand to $13 billion by 2001 from $260 million last year, according to Forrester Research Inc. ''The money will undoubtedly be used to buy more content,'' said Neil Bradford, director at Fletcher Research Ltd., a London- based market research company. AOL Superior Freeserve will need to add more content to attract more users and differentiate it from competitors. ''They have to fight AOL, which offers superior content,'' Bradford said. About 50,000 Freeserve users, including the company's employees, received shares. That's less than half the 114,000 who had registered for preferential allocation of its shares. Freeserve also plans to benefit from an expected explosion in the number of Web users -- the Computer Industry Almanac forecasts U.K. Internet users are set to more than double to 17 million next year from 1998. Its Web site is already the nation's third-most visited behind those of Yahoo! Inc. and the British Broadcasting Corp. Still, Freeserve's expansion has come at a cost. For the seven months through April, Freeserve lost 1.04 million pounds on revenue of 2.73 million. It won't say when it expects to break even on the revenue it gets from advertising and phone calls on its free service. It's also having problems maintaining clients: about 830,000 of the 2.15 million accounts opened with Freeserve are no longer active. Deutsche Bank and WestLB Panmure Gordon, for example, estimate the company's true value at about 600 million pounds. On Friday, analysts Peter Wyatt and Paul Smiddy at Credit Lyonnais Securities issued a ''sell'' recommendation on the stock, valuing it at 106 pence a share. The issue price of 150p was a premium to its U.S. counterparts such as AOL and Yahoo!, they said. Shares began trading on the London and Nasdaq stock markets today. The sale is being managed worldwide by Credit Suisse First Boston and Cazenove & Co.