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Friday, August 6, 1999 Published at 17:45 GMT 18:45 UK

Business: The Company File

UK Internet stock flies on debut

Unlike some Internet stocks the eXchange has already made profits

Shares in eXchange Holdings rose more than 10% within minutes as the UK's second largest Internet flotation so far got off to a successful start.

Traders snapped up the stock on the London Stock Exchange on Friday morning, pushing the price up from its placing at 200p to 226p.

It seemed that the online financial services company had swept aside recent sharp falls in US technology stocks.

However, some nervousness edged in later in the day and the shares eventually closed at 209p, a premium of 9p.

As a result of the wild swings in US Internet stock prices - with more than 10% wiped this week from the value of indexes following the sector - the price for shares in the offering had been set slightly lower than had been expected.

Closely watched

But despite a relative decline in interest compared to the partial floating of shares in Freeserve in the UK last week, the stock being offered could still have been sold 17 times over.

Its performance will be closely watched coming less than two weeks after the UK's first major Internet float, of Internet Service Provider Freeserve, whose shares rose more than 50% before settling about 30% above its offer price.

The eXchange, which is eight years old, provides financial services information to financial advisors. The successful debut gave it a market value of more than £400m.

Unlike Freeserve, which is less than a year old, eXchange has already made profits - of £4m on sales of £16.6m in 1998. It has about 10,000 financial adviser clients and carried 47 million quotations over its system in the last year.

Its lead in its sector of the business e-commerce market and exposure to the lucrative savings market is also seen as having growth potential, although rivals are already lining up.

Fingers in the pie

The eXchange float comes at a time when there are signs that US investors' desire for Internet related issues is waning.

In contrast to the usual rocketing rises, there were first day falls for four Internet businesses this week.

The eXchange's float price was below the top end of the range indicated to investors of 170p- 207p .

Ahead of dealing starting the eXchange's grey market price (unofficial dealing) at Financial Spreads had slumped more than 20% since the end of last month.

But analysts accurately predicted that eXchange would do well as European investors scrambled to pick up the UK's next big Internet stock.

"I think the tendency will be to say, 'Yes we'll have some shares to make sure we have our fingers in the pies'," said one.

Like Freeserve it is helped by the shortage of available UK Internet shares.

The company began in 1991 as a joint venture between AT&T Istel and 20 UK insurance companies that wanted to promote the distribution of their products through independent financial advisers.

In February 1998, chief executive Paul Lindsey led a management buyout.

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