Terra Stock Fervor Surprises Critics in Spain
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Spain's analysts and government critics are still reeling from the spectacular stock market debut last week of Terra Networks.
Terra tripled in value its first day on the Madrid stock exchange, outshining even the most idealistic projections and stunning government critics.
After years watching Internet stock fever in the United States, Spanish investors looking for the next Yahoo! or AOL could finally place their bets on a local company. Terra Networks, the Internet division of Telefónica, opened at 13 euros Wednesday and closed at 37 Euros in its IPO.
Valued at 10.36 billion euros, Terra is now Spain's ninth largest and the world's eleventh largest Internet company in terms of capitalization. This spectacular auction block performance by the subsidiary of a once public monopoly has brought harsh criticism by Spain's opposition parties, particularly in view of the fact that Telefónica executives with stock options made $100 million in one trading day.
"In the stock market, people win and people lose, but I don't suppose anyone would call for closing down the stock market," stated Aznar. The government has promised to tax the executives' earnings at a higher rate.
Terra's performance has shamed even the most optimistic analysts, who consider this week's events to be the start of a Spanish Internet investment craze.
"We're on the doorstep of a new technological revolution worldwide and in this case Terra has been the first company of this type to hit the Spanish market. At any rate, it has benefitted from what we might call a 'debut effect,'" stated Emilio Ontiveros, economics and business professor at the Universidad Autonoma de Madrid, to Canal Plus.
"I'd say that the financial environment is favorable, and in a way the Spanish investor was waiting for this type of stock. But underlying all this, no doubt, is an element of gambling that I think is excessive."
Terra was formed in 1998 as Telefónica Interactiva. The company is not expected to show profit until 2003. The company's stock went down 15 percent on Thursday, though Telefsnica stock hit a record high.