Personal Finance: Will the Net `bubble' last?
Saturday 12 June 1999
Earlier this week Dixons, the electrical chain, confirmed plans for a separate flotation of Freeserve, its free Internet service, which has racked up more than one million new customers since launch in late 1998. Valuations of Freeserve range from pounds 1.8bn to pounds 3bn.
Is Freeserve - and the many other Internet-linked firms whose dizzying rise in share prices have confounded stockmarket experts - really worth that much?
On 19 April, some Wall Street watchers thought the crash had come. The 15 constituent companies in the Dow Jones Internet Commerce Index fell by a record 17 per cent while the technology-heavy Nasdaq Index recorded its second-worst points fall, down 138.43 or 5.6 per cent. Yet, since then, it has been back to normal for many Internet stocks, taking the up elevator.. Two days later Nasdaq roared up 6.1 per cent.
The Internet feeding frenzy has been mostly an US phenomenon, but it has not entirely passed the UK by. On 1 January, 1998, the new FTSE Information Technology sub-index began. It had a bumpy ride last year but managed to outperform the FTSE All-Share by about 25 per cent.
In the first three months of 1999, Dixons itself was the FTSE 100's top performing share.
On 1 April this year, the FTSE International set up the Internet Index, with just eight shares, six of which are listed on AIM (the Alternative Investment Market). One, AIM-listed firm, Voss Net, that markets e-commerce software, was the London market's top performer in March, up almost 140 per cent. Other firms in the new index are: Dialog Corporation; Gresham Computing; Easynet; Intelligent Environment Group; Internet Technology Group; Netcall, and VirtualInternet.net.
As with many Internet investments, there are big promises of jam tomorrow. Edward Forwood, of stockbroking firm Durlacher, admits: "There is an element of speculative bubble", and believes it would be very difficult for private investors to pick the eventual Internet winners over other companies that he writes off as a mixture of "doggy and dodgy".
Most of the few Internet firms with stock market quotations have actually floated only a small proportion of their shares. Lack of supply has helped boost prices to stellar heights. Which brings us back to Dixons, now considering the flotation of its Freeserve subsidiary, apparently.
As a pure Internet service provider Freeserve might be worth maybe pounds 250m, according to analysts at Fletcher Research, but as an e-commerce provider in the future it is likely that you could add at least another nought to that number. In fact, William Reeve, at Fletcher Research says: "Freeserve's relationship with its users is deeper than merely as a website, so it may be able to aspire to become a major e-commerce player," and he suggests a possible value of around pounds 3bn.
The next question is how much of your hard-earned savings should you consider putting into Internet stocks? - as a private investor, only the gambling money that you can afford to lose.
Edward Forwood of Durlacher says individuals looking for exposure to the internet should consider Framlington's new NetNet fund, launched in April. It is the first UK-based unit trust dedicated to investing in Internet and Internet-related companies. You may invest from pounds 1,000 as a lump sum, or from pounds 50 per month. It is managed by the same team that set up an US-based Internet fund in August 1996: that's grown by an annualised 106 per cent since then.
The NetNet fund, available in both Maxi and Mini ISAs, as well as a unit trust, aims to invest roughly 40 per cent in pure Internet plays, such as Amazon and eBay, with the balance being in other companies which either generate revenue through the Net or have a strategic commitment to it. The fund has an annual management fee of 1.75 per cent with an initial charge of 5.25 per cent.
NetNet Fund: www. framlington-netnet.com
Life & Style blogs
Who is Teresa Fidalgo? Debunking the fake ghost story that's got Instagram spooked
The 10 Best Scotch Whiskies
Scottish salmon sales leap as Asia develops a taste
Grim second life of the 'breastaurant': The oft-loathed sector is booming in the States thanks to Hooters, Twin Peaks and Tilted Kilt
Health: When masturbation can be fatal: The practice of auto-erotic asphyxia is often concealed by a coroner's verdict. Monique Roffey looks at a lethal taboo
British actor Idris Elba cannot star as James Bond because he is black, says shock jock Rush Limbaugh
Ukip member gets into Christmas spirit with Union Flag plea to Santa 'for our country back'
Germany anti-Islam protests: 17,000 march on Dresden against 'Islamification of the West'
Immigrants make UK racist, says Ukip councillor Trevor Shonk
Nigel Farage: Ukip leader named 'Briton of the year' by The Times
BBC director Danny Cohen: Rising UK antisemitism makes me feel more uncomfortable than ever
- 1 The political parties aren't all the same – which means 2015 will be a 'big-choice' election
- 2 President of Argentina adopts Jewish godson to 'stop him turning into a werewolf'
- 3 ALS ice bucket challenge co-founder Corey Griffin drowns, aged 27
- 4 The 'Black Museum': After 150 years, public set to see exhibits from police’s grisly crime museum
- 5 Naomi Wolf reacts to Isis 'conspiracy theories' critism after she questions whether beheading videos are real
£18000 - £22000 per annum: Recruitment Genius: Do you have previous experience...
£16000 - £18000 per annum: Recruitment Genius: This is an exciting opportunity...
£30000 - £50000 per annum: Recruitment Genius: Are you a Web Developer looking...
Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...