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QXL scales down IPO expectations

We think it's worth a punt

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Tim Jackson, the UK’s leading Net pundit and founder of QXL.com, has seen his putative paper fortune shrink from £127 million to as little as £32 million. Today, QXL, the UK’s biggest Net auction house, announced the price range for its IPO offering would be 180p to 205p per share, valuing the company at £212 million to £242 million. Two or three months ago, the PR spin doctors were talking up the value of QXL as high as £750 million, two or three weeks ago, the spinning revolved around the £350 million mark. The secret of the soaraway IPO is timing. And this ain’t running in favour of QXL, the UK’s biggest Net auction house, with a annual sales run-rate of just £12 million. It's got eBay, the uber-brand for online auctions, breathing down its neck and if that weren't enough, Fairmarket comes along with a mega-auction network, backed by Microsoft, and linking 100 sites. Worst of all, the froth is draining away from the UK’s few net stocks, so far as investors are concerned. Yesterday, Freeserve, the UK’s biggest pureplay Net company (in terms of market cap) fell below its issue price for the first time. Despite all this, QXL should be a successful float -- even if it gets less money to play with for marketing and expanding distribution overseas. Set up only in 1997, QXL is almost a textbook example of a VC-backed Net business. And unlike many, it’s got grown-up managers. Also, QXL's auction business is more defensible than the Freeserve's free ISP model. Costs are lower and competition is much less fierce in the auction market. Also, QXL's revenues are growing at 60-70 per cent per quarter, CEO Jim Rose said in an interview with

The Standard

, a rate that Freeserve is extremely unlikely to touch through organic means. We think QXL's worth a punt. At very worst, a company like eBay will come along and snap it up with its own stratospherically rated stock. Dealing in QXL.com shares is slated to begin on 7 October.®

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