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.
Fueling accusations of scandal and cronyism is the fact that
Telefónica president Juan Villalonga is a childhood friend of prime
minister Jose Marma Aznar.
“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
“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.