Original URL: http://www.theregister.co.uk/2000/03/29/four_reasons_why_tonline_doesnt/

Four reasons why T-Online doesn't bark

This ain't going to be a dog stock

By Valerie Thompson and Drew Cullen

Posted in Business, 29th March 2000 08:25 GMT

T-Online is to price its shares at €35-50, valuing the ISP anywhere between €39-55 billion (£24-55 billion), according to "people close to the share issue" cited by the FT. This will make it easily Europe's biggest Internet player. Only nine per cent of T-Online's shares will be released for IPO, and 60 per cent of this is reserved for retail investors.

The huge pricing range reflects the "volatile performance of ISP stocks", reports the FT (which really means 'Internet' when it refers to 'ISP'). We agree. But we think that T-Online is a cut above recent high-profile European IPOs. Reports that the mania for Internet stocks is waning in light of the recent poor performance of shares from Lastminute, World Online and Lycos Europe are a bit premature.

It could be that European investors are becoming more discerning when it comes to Internet shares, but don't expect them to pan everything related to the Internet. There are other reasons why these Internet stocks performed poorly in the first days of trading. Aggressive pricing is at least partly to blame. Lastminute shares were priced by Morgan Stanley Dean Witter at the high end of the scale, leaving little upside after IPO day.

Furthermore, the lack of a ballot or lottery meant that each retail investor had too few shares from which to profit (something that T-Online will probably avoid, see T-Online puts IPO to the ballot). Aggressive IPO pricing may be a factor with World Online and Lycos too (traditionally, in Europe IPOs are priced conservatively to help along a first day ramp.) Expect T-Online to fare a bit better than the rest for the following reasons: