Even as European leaders wrapped up a
summit meeting in Portugal Friday to discuss building a future
around the new Internet economy, the mania for new Internet
offerings here seemed to be waning.
Europe has jumped on the Internet bandwagon with abandon,
recently saturating the market with initial public offerings in an
effort to close the gap. And that's part of the problem, analysts
Facing a glut of high tech shares dumped on the market over the
past few weeks, investors are now becoming more selective about
shelling out for just any Internet IPO a similar trend is
occurring in the United States. Many fund managers becoming jaded
by overpriced offerings and Internet debuts falling short of their
The latest victim was Lycos Europe, which hit Frankfurt's Neuer
Markt on Wednesday as the daughter company of successful U.S.-based
Web portal Lycos Inc. Investors jumped to get onboard for the
issue, oversubscribing it nearly 33 times. And in unofficial
trading before the IPO, they raced to swap shares at prices as high
as 40 euros ($38.80) high above their opening price of 23.50
But on the official opening day of trading, the stock flopped
dipping as low as 22.10 euros ($21.44) before closing down 3
percent at 22.75 euros ($22.07).
That disappointment followed a similar tailspin by
Lastminute.com, one of Britain's most hyped share offerings ever.
At its Tuesday IPO, investors rushed to sell, driving the stock
down 16 percent to 320 pence ($5.02) from its offering price of 380
And Holland-based World Online billed as the biggest initial
public offering by a European Internet company came up short in
its debut on March 17, closing at just 43.20 euros ($41.90), barely
above its introductory price of 43 euros ($41.71).
"I think we are in the midst of one of the biggest hypes I've
ever experienced," said Matthias Joerss, an equity analyst with
BHF Bank in Frankfurt. "There are just more and more huge issues
coming to the market in such a short time, and I think supply and
demand are finally balancing out."
Analysts emphasize that the recent IPO disappointments don't
reflect the underlining strength of Europe's fast growing Internet
sector. Confidence in the technology was underlined by this week's
summit meeting in Lisbon, where the leaders of the European Union's
15 countries discussed ways to further high-tech growth and catch
up to the United States.
As Europe looks to close the gap, investors are putting big
expectations on European Internet stocks to grow quickly and that
has only made IPO madness all the more acute here, said Markus
Glockenheimer, Internet analyst with Dubueck Asset Management in
In the United States, the IPO fever pitch has been more measured
with technology stocks and Internet companies that specialize in
business-to-business e-commerce still performing strong. But the
sheer number of IPOs coming to the fore are starting to change
attitudes there as well.
"For the right sector, there is still high demand for IPOs, but
there's already a selectivity creeping in. We're seeing some of the
expectations being mitigated by the big volume of issues being
offered," said Dave McMillion, director of capital markets at
Lazard Freres and Co. in New York.
By Friday, some of the stocks had bounced back. Lycos Europe was
up 14.45 percent to 22.89 euros ($22.20) and Lastminute.com closed
up 8.1 percent at 332.5 pence ($5.33). But World Online closed at
an all-time low of 27.85 euros ($27.01), down 8.4 percent.
Their struggling public offerings could spell problems for some
of the 200 companies expected to be floated this year on
Frankfurt's Neuer Markt for high-tech stocks. It could even shake
the foundations of highly awaited issues such as next month's
offering of T-Online, the spin-off of Deutsche Telekom's Internet
Already Europe's largest Internet provider with 4.2 million
subscribers, T-Online is expected to dwarf the continent's previous
dot-com IPOs when it is listed April 17. Deutsche Telekom is
selling off 100 million shares, or roughly 10 percent of the
company, and keeping the rest.
While no offering price has been set, analysts put it in a range
between 25 euros ($24.25) to 40 euros ($38.80) making the company
worth 40 billion euros ($38.8 billion) at the high end. Demand for
its shares is also expected to far outstrip supply, although
analysts speculate that the poor showing by Europe's recent
Internet IPOs will calm the urge to price T-Online at the top of