shares continue to slide

Stock dragged below offer price by concerns about loss-making e-tailer's sky-high valuation and irritation of short-term investors

British e-tailer dropped below its flotation price for the first time Tuesday as shares began official trading on the London Stock Exchange. The Internet startup, which has been the focus of much media and investor interest, began unofficial trading on 14 March at 380p, the top end of its range. By mid-morning on Tuesday, however, it was down about 27 points at 355p, and had slid as low as 327.5p by early afternoon.

Short-term investors who signed up for the flotation hoping to make a quick return only received 35 shares each, and many expressed their annoyance by selling off most of their stake. Others were planning to take more radical steps: "I am going to burn my share certificate as an act of defiance and rage against this 'dot con' machine," wrote one shareholder on a financial bulletin-board site.

The Dutch Internet service provider World Online was also trading below its offer price of E43 (£26) on Tuesday, adding fuel to speculation that the European e-commerce bubble might be about to burst. The ISP was Europe's biggest-ever Internet flotation when it came to market last week.

World Online's flotation initially valued the pan-European Internet service provider at over E12bn (£7.4bn) -- ranking it among the top three European Internet groups by market value to date, after Spain's Terra Networks and Italy's Tiscali. World Online's float will be eclipsed in size by Germany's T-Online from Deutsche Telekom next month. It is present across Europe, but so far only shows on measurements from France, where its domain ranks 88th, according to MMXI Europe.

French ISP Liberty Surf, which rose 30 percent on its float day on Thursday, also failed to deliver the triple-digit, first-day gains that Internet stocks have put in of late. However, it was up a further 18 percent in Friday trade.

Despite recent market weakness, Europe's ISPs are valued at a premium to their US counterparts, because they are only beginning to float and fund managers are still boosting tech weightings.

Technology stocks in general led European shares lower on Tuesday after an overnight slide of nearly four percent in America's tech-heavy Nasdaq index. The markets had been bracing for an expected rise in US interest rates after the European close.

The flotation caused shares to jump, Guy Kewney knows it is all going to end in tears. Go to AnchorDesk UK for the news comment.

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