Outlook: Computer stocks
Saturday 27 February 1999
These three companies are all in very different areas of the market, with varying growth rates and prospects. What they all have in common, however, is that they will be capitalised at pounds 300m or less - the small- cap bracket that fund managers have tended to ostracise.
Some firms have good reasons for going public. In a fast-growing industry, they need extra capital to expand and can also use their stock as a currency for acquisitions. A stock market listing also allows companies to offer share options as a way of hanging on to their staff.
Nevertheless, the latest batch may have other motives. Enthusiasm about growing demand for computer services has driven valuations to extreme levels. In some cases this is justified - particularly those with exposure to mobile telephony or electronic commerce. However, others will have a harder time living up to expectations as the IT market slows towards the end of the year.
So the enthusiasm for IT flotations may soon wane. Yesterday's embarrassing debut from Synstar - when the shares dropped 7p below their 165p issue price on the first day's trading - will not have helped. The float appears to be a clear case of CVC, the venture capital group, capitalising on sky-high valuations to make a quick turn on an investment it made only 18 months ago.
With the current batch of IT new issues, it may be that investors are able to pick up the shares at a cheaper price once they have been on the market for a few months.
- 4 Iranian blogger found guilty of insulting Prophet Mohammad on Facebook sentenced to death
- 5 New Tricks: Dennis Waterman to leave the show after a decade of crime-solving
Stamford Hill council removes 'unacceptable' posters telling women which side of the road to walk down
Kim Kardashian 'nude pictures' leaked on 4chan weeks after Jennifer Lawrence 'The Fappening' scandal
Iranian blogger found guilty of insulting Prophet Mohammad on Facebook sentenced to death
Ice Bucket Challenge: US firefighter Tony Grider dies after participating in charity craze near power lines
Hitler’s former food taster reveals the horrors of the Wolf’s Lair
Scottish independence referendum: A nation divided against itself
Scottish referendum results: Cross-party consensus collapses amid Tory-Labour spat on the 'English question'
Scottish independence: David Cameron is becoming the 'George Bush of Britain'
Russia freezes Ukraine into submission: Kiev admits country doesn't have enough fuel for winter
Plebgate MP Andrew Mitchell called officer a 'little s**t', claim court documents 'exposing ex-Chief Whip's 'record of abusing police'
Archbishop of Canterbury admits doubts about existence of God
iJobs Money & Business
£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...
Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...
£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...
To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...