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Monday, September 20, 1999 Published at 16:13 GMT 17:13 UK

Business: The Company File

Freeserve shares hit record low

Shares in Internet service provider Freeserve have fallen below their flotation price for the first time.

Freeserve shares dropped 13% to 135p - 15p less than the issue price eight weeks ago.

The ISP, floated by electrical retailer Dixons, has now seen £140m wiped off its market value since the float.

On their first day of trading, Freeserve shares leapt 37%, making an instant hefty profit for those lucky enough to be allocated a slice of the heavily oversubscribed stock.

However, at the time some analysts warned that the price was unrealistic.

The slide since then has been driven by news of other internet service providers joining the subscription-free bandwagon. Analysts have also queried the lack of concrete information on subscription numbers and churn rates, since the marketing push which preceded the IPO.

Confidence in Internet stocks has been battered, some analysts say, but they say it is still only a temporary blip in the market's love affair with Internet stocks.

"Obviously, there is an element of enthusiasm, followed by an element of reconsideration. But I don't think the Internet phenomenon will go away - there will be renewed rounds of enthusiasm followed by renewed rounds of reconsideration," one analyst said.

Investors pockets hit

Credit Lyonnais market experts Peter Wyatt and Paul Smiddy said in July: "Freeserve is worth less than the float price."

Analysts at Merrill Lynch and investment bank WestLB Panmure put a "realistic" price of between 60p and 80p on the shares.

The share price fall has hit investors who did not sell early.

Those who bought the maximum entitlement of £750 worth of shares will have seen £75 taken off their investment.

More than 50,000 investors applied for 153m shares at the time of flotation.

High-speed link

The share price peaked at 244p on August 2, but has since been falling steadily.

Monday's fall coincided with an announcement by Freeserve that it would begin a trial of high speed Internet access via BT's new ADSL digital platform.

The technology will allow Freeserve users to send and receive data up to 20 times faster than by normal telephone connection.

Users will be given permanent Internet connection at a fixed cost, but with no call charges or dial-up delays.

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