- guardian.co.uk, Tuesday 27 July 1999 15.41 BST
Shares in Freeserve, the UK's biggest internet firm, rose by as much as 48% on their first day of trading yesterday - less than a year after the service was created by electrical retailer Dixons.
Shares went from the issue price of 150p to nudge 222p before falling back slightly, closing at 203.5p and valuing the company at £2.24bn at the peak.
Prices were driven by demand for the stock, which had been conservatively priced. Shares were 30 times oversubscribed, encouraging Dixons to price the issue at the top end of the 130p to 150p range. Freeserve has yet to make a profit; it turned in a loss of £1m last year on turnover of £2.7m.
The market debut meant that John Pluthero, chief executive officer, made a hefty paper profit on the deal. He holds 1m free shares in Freeserve, worth more than £2m last night. He was also sitting on a paper profit of £350,000 from share options.
Advisers denied last night the issue had been underpriced, pointing out that technology stocks usually begin trading at a big premium. Advisers also pointed out that Freeserve's banks, Credit Suisse First Boston and Cazenove, had expected that the net company would be valued at £2bn in the aftermarket.
The shares are also being traded on Nasdaq, the American exchange, where Freeserve rose more than 40% in early trading.
In London, traders said nearly 70% of the new Freeserve shares had traded on the first day. Dixons still holds 80% of Freeserve's equity.
The issue saw the electrical retailer sell 63m shares, while Freeserve issued 90m new shares. The net firm plans to use the proceeds to pay for new content to allow diversification away from telecom revenues and towards transaction-based fees.
The high demand meant that shares were issued only to registered customers and employees, who sent in 42,000 applications, leaving 8,000 disappointed.
But 40% of the successful applicants received their full allocation of shares, with each applicant given shares worth up to £750. Institutional investors were allocated shares on a discretionary basis.
