Lycos Europe catches web fever

The flotation of Lycos Europe on the stock market has proved to be yet another internet flop.

Lycos Europe stock had been issued to investors at 24 euros a share, but as soon as trading began, its price dropped.

At one point shares dropped as lows as 22.1 euros, before closing the day at 22.75 - a loss of 5.5% for investors.

The firm floated on Frankfurt's Neuer Markt, which specialises in technology companies.

The disappointing stock market debut comes in the wake of poor performances of a slate of other internet stocks, like online travel agent and retailer Lastminute.com, which flopped in London, and internet service provider WorldOnline, which faltered in Amsterdam.

Lycos Europe had priced its shares at the top of the range, because investors had signed up for 30 times more shares than were on offer.

On the strength of this Lycos managed to raise 612m euros ($588m, £372m) in the flotation. This would have valued the firm at 5.5bn euros ($5.35bn, £3.34bn).

"The share price reflects the sentiment in the internet sector at the moment, and it isn't that good," a spokesman for Lycos Europe explained.

He pointed to the shares in other internet companies that had also recently fallen below their issue price.

Michael Beyer-Enke, analyst at Deka Kapital in Frankfurt, said strong demand for share offers was not an indicator of true investor interest anymore.

"In general people get less shares than they subscribe to ... that's why they are signing up for more shares than they really want to buy. An over-subscription doesn't say that much", he said.

Chasing Yahoo!

Lycos hopes that the fresh money will allow it to build its brand and overtake Yahoo! as Europe's top web portal.

But many analysts doubt whether this is feasible.

While Yahoo! focuses its activities on one name, Lycos is running separate brands like Comundo, HotBot, Sonique, Angelfire, Tripod and Fireball for its web portal, internet access service, community sites and other operations.