Freeserve nearly 30-times subscribed

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THE FLOTATION of Freeserve, Dixons' free Internet service provider, has been nearly 30-times subscribed, it transpired yesterday, making it one of the most sought-after initial public offerings ever on the London stock market. All cheques relating to the offer are being cashed and refunds will not be paid until next week.

Sponsors to the offer are committed to meeting retail demand for the shares in full at the minimum subscription level of pounds 250. But wealthier investors who applied for larger allocations will be disappointed.

Freeserve has cashed all cheques relating to the offer, many thought to be for tens of thousands of pounds, and amounting to several billion pounds. Since refunds won't be posted until next week, the sponsors will make a considerable gain from the time value of the money. Over 114,000 Freeserve users registered for the issue, but Freeserve declined to say how many had applied.

One adviser said: "To allocate the shares, you have to have the money. You can't ask people to write a smaller cheque."

Sources connected to the flotation said it was subscribed "nearer 30 than 20 times", making it one of the most popular new issues recently.

The flotation price is said to be at the higher end of the 130p to 150p range, valuing the company at pounds 1.5bn. Brokers expect the shares to soar through the 200p level when conditional trading - in effect real trading - begins this afternoon at 2.30pm to coincide with the opening of Nasdaq, the US technology stock market where the shares will also be listed.

The shares are scarce because only 18.25 per cent of Freeserve is being floated. According to insiders, no Freeserve customer who applied for the minimum pounds 250 of shares will be rejected. Freeserve is to publish a formula today enabling those who applied for more than that to calculate their allocation.

Applicants intending to sell their shares today for a quick profit will have problems because share certificates will not be posted for at least a week. "Although you'll be able to calculate your allocation, you can't be sure you've been successful because you may have forgotten to sign the cheque or filled in the forms incorrectly," a spokesman said.

Freeserve's advisers at Credit Suisse First Boston, the investment bank, worked late into Saturday night rationing the shares among institutional investors. Databases about fund managers' selling habits were used to select only those likely to be buying for the long-term.

"Inevitably there will be some disappointed institutions," the spokesman said. The allocations have been designed to be so small to make "stagging", selling entire holdings at a premium on the day of flotation, unworthwhile.

The success of the flotation is expected to encourage a flood of other British internet IPOs. However, some adviserswarned others might not generate the same level of interest, since they lack the retail network Dixons has been able to plug into.