Outlook: QXL.com

Outlook

QXL.COM could hardly have chosen a worse time to come to the stock market. Shares in Freeserve and eXchange, Britain's only two quoted "pure" internet stocks to date, now both trade well below their issue price, the Regus debacle seems to have knocked the stuffing out of the new issues market generally, and to cap it all, stock markets both in London and New York are beginning to look decidedly unsettled.

Against this backdrop along comes poor little QXL.com, a carbon copy of the US online auction company, eBay, with a story few would have believed even in the hey day of internet fever earlier this year. The issue has some powerful backers, so it is still just about possible the flotation will succeed. However, the chances of QXL.com being forced to follow Regus into ignominious retreat seem quite high.

Already the valuation has had to be markedly scaled back from earlier inflated estimates. Even so, the method used seems fanciful in the extreme. Essentially what the sponsors have done is take eBay's valuation as a multiple of its projected sales in 2001, and discounted it by 26 per cent to take account of the fact that QXL.com is a younger company in a less developed market, Europe. There's a little more to it than that, but not much. Investors should treat this exercise in valuation fantasy with the contempt it deserves.