Flotations set to be shelved as hi-tech stock rout gathers pace

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The dramatic slide in the prices of technology and internet shares has put in jeopardy the floats of some 80 technology-related companies seeking London listings this year, bankers said yesterday.

The techMARK index of technology shares closed down 70.87 points at 4,330.80 yesterday, well below its high of 5,743.30 on 6 March. New issues now risk being pulled altogether amid signs institutional investors have become wary of young companies in the sector.

Those intending to float include egg, the internet savings bank operated by the Prudential, and Yes TV, an interactive television business valued at £500m.

Gareth Lake, head of UK capital markets at Schroders, said: "There's a hell of a lot of [tech] companies around. Institutions are being increasingly selective. Some floats are bound to fail. Anyone trying to place shares now is having a really tough time."

While Schroders last week successfully placed shares in Brainspark and Inflexion, the internet incubators, investors were getting nervous. "Some institutions said: 'That's it. No more TMT [telecoms, media and technology].' They're taking stock - or rather, they're not."

Richard Dyett, an analyst at Investec Henderson Crosthwaite, put institutions' bearishness down to fatigue. "Fund managers have been sitting through five presentations a day, and they're getting weary," he said. "They've already spent all the money they allocated to technology stocks."

Bankers touring fund managers with the latest hi-tech issues agreed. Chris Wilkinson, who is managing Dresdner Kleinwort Benson's flotation of Netstore, a B2B company, said liquidity was "running out" and fund managers would be focusing on companies with a near-term chance of cash generation. "I see no reason why we won't proceed, but who knows? If the techMARK falls another 500 points, it's going to be difficult."

Oliver Scott, who is managing Peel Hunt's flotation of iomart, a Net service provider, was more sanguine. "We started marketing only yesterday so it's too early to say how it's going. We wouldn't have published a prospectus if we thought there would be a problem."

A spokesman for Yes TV said: "We've said we'll float by June and we're sticking by that."

The market's newfound scepticism will make it harder for fledgling dot.coms to replenish cash piles from first-round fundraising. Clickmango, a health and beauty website launching on Monday, is already on a second round of fundraising with venture capitalists, despite raising £3m in September. Its site cost £1m to construct.

Clickmango's chief executive Toby Rowland, son of the late Lonrho founder Tiny, said: "We're investing hard. If we were in a float right now, we'd be worrying. But if you lose sleep because of share price falls, you shouldn't be in a tech company."

Larger floats, such as egg, timetabled for this autumn, are likely to be priced more conservatively. Deutsche Telekom, the German phone group, is thought to have cut its float price for its T-Online Net arm by 20 per cent. As one investment banker put it: "Our pitch is 'a tech stock on a non-technology price'. Institutions like that."

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