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European Internet IPOs Disappoint as Mania Ebbs
By Hans Greimel   Associated Press
FRANKFURT, Germany — 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 say.

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 hyped-up expectations.

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 euros ($22.80).

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 pence ($5.97).

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 Frankfurt.

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 service provider.

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 that range.

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