QXL scales back valuation for flotation as Net stocks decline

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QXL.COM, THE online auction operator, yesterday dramatically scaled back the valuation of its initial public offering of shares, and pointedly denied that its flotation could be pulled following recent weakness in UK Internet stocks, notably Freeserve.

QXL plans to raise, after expenses, a minimum of pounds 48.4m in cash through the flotation of 25 per cent of the stock, valuing the company at between pounds 212m and pounds 242m - well below earlier estimates of pounds 500m.

The company's pan-European online auction service allows PC-equipped consumers to bid for goods and services offered by QXL, retailers or QXL members. Trading goes on 24-hours a day, seven days a week on French, British, German and Italian language sites.

New ordinary shares will be listed in a range of between 180p and 205p, and will have a dual listing on the London Stock Exchange and the US Nasdaq. The final offer price is set for 7 October with unconditional dealings due 14 October.

"The European market opportunity is huge," said Jim Rose, QXL's chief executive. "It will have as many users as the US by 2002/3. Our business has a real model: it's e-retailing and it's a long-term opportunity."

Should the float be successful, it will mark a big payday for Tim Jackson, a columnist with The Financial Times. He will retain a 17.5 per cent stake. Apax Partners, the venture capital firm, will hold 17.9 per cent, while Berand Arnot's Europe@Web will own a 14.2 per cent issue

Question marks have surrounded the valuation of Internet stocks both in Britain and in the US.

The UK's biggest Internet float, Freeserve quickly soared to 247p, briefly valuing the company at pounds 2.5bn, before tumbling. Yesterday it slid further below its IPO price of 150p, closing down 9p at 137p in heavy volume of 5.6 million shares. Another Internet stock, eXchange, which offers financial services over the web, is also plunging. Its shares lost16.5p to close at 173.5p yesterday, compared with a flotation in the summer at 200p.

Analysts blame the declines on the high IPO prices the issues attracted due to the relative lack of such UK issues. "Their valuations were based on being one of the few that came to market," said one Internet entrepreneur.

Freeserve has suffered from an inability to differentiate itself from copycat competitors that quickly aped its free ISP subscription business model. Since Freeserve launched a year ago some 250 free ISPs have sprung up.

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