Freeserve offers shares to users

Registered users of leading UK Internet service provider Freeserve are being offered the chance to buy shares in the venture direct via the Internet, as part of planned partial flotation of the group.

Freeserve owner Dixons Group, which has nearly doubled its share price and seen billions of pounds added to its stock market capitalisation since the launch of the free ISP last September, confirmed this week it is to sell about 18.25 per cent of the business to institutional investors and its own customer base in a float scheduled to be completed later this month.

Freeserve account holders are being offered preference to buy shares for a minimum application of &£250. It remains unclear at what price shares will be offered, with estimates of Freeserve’s value varying widely between &£1bn and &£3bn.

Yet despite anticipated enthusiasm for the “democratic” element of the online share placement, the move is bound to raise concerns in some quarters over the dangers of hyping what is bound to emerge as a risky stock to inexperienced first time investors.

A statement confirming the move confirmed that Freeserve has generated &£2.73m in revenues between its September launch and May 1, and has made net losses of &£1.04m. These figures mean Freeserve, which has now embarked on a heavyweight advertising campaign to maintain the momentum of its launch, could demand that investors accept a valuation of the company at anything between five hundred and a thousand times its revenues.

The statement also confirmed that Freeserve, which is still to announce any official third-party audit of traffic on its service, generated 64 million page views in the four weeks to May 29, “of which 28 million related to sites provided by its content partners”. The latest total of active subscribers to the service is 1.2 million.

Dixons insists that the flotation will see all commercial relationships with Freeserve continue at an “arm’s length approach” to ensure that the ISP secure maximum commercial freedom under the new ownership arrangements.

New Media is edited by Michael Kavanagh, michael_kavanagh@compuserve.com

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