Internet Floats Hit Brick Wall

The number of dot com companies floating on the ASX will almost halve this
financial year, according to consultancy firm KPMG’s 1999-2000 capital markets

The survey claims that 1999 to 2000 will be remembered as the year of the
dot com floats, with 54 Internet-based businesses listing on the sharemarket
and raising a total of $900 milion, up on $250 million the previous year.
This year, however, will see all that change, with only 30 floats expected
for the 2000-2001 financial year. These will raise approximately $500
million, according to the survey.

“To list successfully, dot com companies will need to demonstrate they have
a sound business model and can actually make money in the near future,” said
national head of KPMG Finance, Julian Vella. Vella said investors were
burned by the Internet boom of the previous year.

“The share prices of two thirds of the 54 Internet-based businesses to float
last year were trading below their issue price at 30 June, 2000. In fact,
seven of the worst ten price performers were dot coms. The worst performing
stocks were and eisa, which were trading at discounts of more
than 80 percent to their issue price at 30 June.”

But it wasn’t all bad news for tech stocks, Vella added. “Six of the ten
best performing floats were Internet related businesses. The extremes in
share price performance in this sector highlight the difficulty that
investors had in judging the value of Internet listings.”

The best performing Internet stock was Powerlan, which recorded a gain of
almost 600 percent at 30 June.

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