Carphone Warehouse makes lacklustre debut

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The Independent Online

Carphone Warehouse, the mobile phone retailer, made a disappointing début on the stock exchange yesterday. Its shares, priced towards the top end of the proposed range at 200p, rose just 1.5p to end at 201.5p.

Carphone Warehouse, the mobile phone retailer, made a disappointing début on the stock exchange yesterday. Its shares, priced towards the top end of the proposed range at 200p, rose just 1.5p to end at 201.5p.

The volume of shares traded reached 135.4 million, leaving Carphone Warehouse outranking even the market giant Vodafone AirTouch yesterday as the most active stock on the Exchange. During the day, the shares jumped 19 per cent to a high of 237.5p before falling back to its more modest closing price. The high-profile flotation valued the company at £1.64bn at the offer level, and raised £185m to help fund its expansion into Europe and mobile services.

Nick Bubb, an analyst at SG Securities, said: "This float has brought out a lot of stags who are taking profits. It will get to 150p before it gets to 250p." Mr Bubb has argued that the shares were overvalued since the proposed range of 170p to 220p was announced last month.

Charles Dunstone, Carphone Warehouse's chairman and chief executive, said he was "pretty happy" with the City's reception to the float. He said: "People who know tell me that we are doing this in very difficult market conditions." Mr Dunstone, who had just returned from a tour promoting the company to investors in the US, said he had been particularly pleased with institutional investors' response.

He said the issue was about 8.5 times oversubscribed, above widely quoted estimates that the demand for shares would exceed those on offer by about five times. But this included a relatively small level of interest from retail investors, many of whom are thought to have been put off by the company's decision to give preference to those who signed up to a three-month lock-in clause. Of the 11,500 private investors who subscribed, 10,300 agreed to the lock-in option and were rewarded with the full amount of shares they requested. The remainder received 60 per cent of their allocation.

Asked why the company had not priced itself at the very top of its price range, Mr Dunstone said: "We didn't want to be pigs about it. We still own the vast majority of the company ... And we wanted to make sure the business would be strong and healthy in the aftermarket."

Following the float, in which Mr Dunstone sold shares worth £56.3m, he will retain a 37.7 per cent stake. At yesterday's closing price, his holding was valued at £621m compared with an investment of £6,000 when he set up the business in 1989. David Ross, chief operating officer, sold a £39.4m holding but still owns 26.4 per cent of the company.

Mr Dunstone and Mr Ross were at their desks in Acton, west London, yesterday. Mr Dunstone said: "We have told people what we are going to do. Now we've just got to get on and do it."

The company plans to double the number of its stores, where it sells mobile handsets and tariffs on behalf of all the main networks, within three years. It also wants to invest further in its wireless internet service, Mviva, in which America Online has taken a minority stake.

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