View from City Road: Try reading the fine print

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Another day, another new issue fiasco. Institutional investors are privately seething over the way they have been treated by merchant bankers this year.

Sponsors are accused of taking a cavalier attitude to due diligence procedures, landing investors with a string of new issue disasters. Nobody is yet boycotting the new issues market, but some are close.

Videologic's collapse to just half its flotation price three months after coming to the market is only the latest example. Azlan, another computer business, closed at 128p yesterday, down 32p and pitifully lower than last year's flotation price of 230p.

If these were all companies brought to market by the Flogit & Run school of stockbroking, it might have been understandable; investors would at least have been duly warned. But they were not; some of the best houses in town put their names to these prospectuses.

Investors can or should be able to read, however. The Videologic prospectus with which Warburgs tried to woo them during the summer was nothing if not forthright about the risks attached to investing in a company which no one without several electronics doctorates could hope to understand.

Videologic operates in markets characterised by rapidly changing technology in which the company might, or quite possibly might not, retain a lead. Its profits depend on cracking new, untested markets.

The market for Videologic's video enhancing technology is highly competitive. The company's success depends on retaining its key staff, the components it needs are available from only a few sources, and once developed, its products need to be protected by patents which may not be easily available. That's the excuse, anyway. Plausible enough if we were a year or two into the float, but three months?

Top names, top lawyers, accountants, compliance officers and PR advisers are no guarantee against a dog, it seems.