Ofex: the Wild West market

OFEX traded company Display.IT promised investors much. Too much, it would now seem. What had appeared to be a well-crafted attempt to take on the might of financial information vendors, such as Reuters and Dow- Jones, seems to be less exciting than was first expected.

The company was formed as an Internet start-up by an American, Peter Levin, who owns 63 per cent of the company. At one point it was worth pounds 135m. Ofex, the over-the-counter market, is far more loosely regulated than Aim, another route for start-up companies.

It is too early to forecast the company's future - certainly in its present form - but indications are confusing. The company had said it had a deal with a Luxembourg-based reseller, Alsina, to guarantee pounds 11.5m-worth of sales of its browser program. The Display.IT browser allowed users to obtain a Reuters data feed off the Internet.

The company said Alsina was backed by US tycoon Ross Perot. But Mr Perot has denied any such link, and Alsina is apparently unknown in the computer world, nor is there any trace of it in Luxembourg.

On Friday, Mr Levin told the market that half of the pounds 11.5m had already been paid, and that the company had been the subject of a concerted bear raid. He re-emphasised his belief in the integrity of the company, and said he had bought a further 7,500 shares in the company last week.

Display.IT demonstrates the problem of any company coming to the market with great expectations, but being unable to live up to them.

Who's to blame? If there is a scapegoat, it may be that the regulatory penalties, for company or adviser, especially on a market such as Ofex, are almost non-existent.

So do investors want a service such as Ofex? That is a matter for individual discretion. So long as the health warnings are clear, Ofex is the best place for the smaller scale, more wild-eyed fringes of entrepreneurialism to find the backing and belief that is otherwise unavailable.

But that behoves the advisers to be ultra cautious. Perhaps sufficient checks have not been carried out. If so, that is a pity, as it is then the advisers who are to blame. Will they carry the can?

MEANWHILE, Gordon Brown's Budget has been met with ringing endorsement, howls of outrage, and marked indifference.

As well as the well-signalled windfall tax on utilities, there are now ructions in the City over the loss of its right to receive dividend income tax-free on its market-making accounts. There is also disarray in the arcane world of futures and options, where dividend income was calculated gross. If it has to be calculated net, goes the theory, the value of the contracts falls. Hence the boom in the market on Thursday, as banks rushed to "hedge" their positions, by buying the underlying shares, to protect their derivative contracts.

Most commentators believe the market is now overvalued, yet it continues to rise. With Wall Street closed on Friday, there was no clear guide from across the Atlantic. Tomorrow could be just another day - or it could be a bloodbath.

One aspect of the Budget to have gone largely unmentioned, however, is the failings of the "Welfare-to-work" scheme, funded by the windfall tax. Welfare-to-work has obviously struck a populist chord, but will any real jobs arise from this tactic? Most unlikely. Genuine job creation is notoriously difficult to achieve.

The most effective move by the Chancellor for the future wealth of UK plc could well have been the pounds 2.3bn slice of the windfall tax he allocated to education. Perhaps that's what the stock market has been so excited about.


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