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Outlook: Freeserve float

IF YOU ARE looking for reassurance about the Freeserve flotation, don't read the prospectus, published last night. This contains a record breaking, at least by UK standards, eleven pages of financial health warnings, as well as an extra half-page "cautionary note regarding forward looking statements; market data".

As the sponsors are keen to stress, this is standard practice for Nasdaq IPOs in the US, but to more conservatively minded British investors, it will come as a bit of a shock. For the time being, Freeserve's operating expenses outstrip its revenues, and its business model, unique at the time it was launched just ten months ago, now has a host of copycat imitators.

The sale is backed by a heady list of top drawer City names, some of which are supporting their client with some equally heady projections of forward revenue. For instance, CSFB reckons that by 2015 the company will have revenues of pounds 2.95bn and operating profits of pounds 1.8bn. These predictions should be taken for what they are - works of fiction.

But that doesn't mean this offer is a fraud. Freeserve has made quite a splash since it was launched. For investors, the gamble is that in a high-growth, fast-moving industry, Freeserve can remain ahead of the game. Traditional investment criteria mean nothing on these wild west frontiers of the business world, but equally, it is nice to see genuine venture capital raised on the stock market for a change.