Freeserve, which is Britain’s largest ISP and is planning an IPO likely to value the company at up to 2bn pounds ($3.7bn), only achieved puny revenue of 2.73m pounds ($5m) between its launch in September 1998 and May 29. In the same period, it made a net loss of 1m pounds ($1.8m), according to figures released by the company yesterday.
Up to 18.25% of the company is to be put up for sale in a global offering for institutional investors by the company’s owner, UK retail electronics group Dixons Plc. The shares will be traded on the London Stock Exchange and the company has applied to have the ADRs quoted on the Nasdaq market.
What is likely to cast a shadow over the huge marketing operation for Freeserve’s shares are reports that America Online will launch a free ISP service in August called Netscape Online. AOL was toppled from its position as number one ISP in the UK by Freeserve’s success and has been bitterly critical of the free ISP model.
However, the Netscape acquisition gives it a well-known name to promote a rival free service and hit back before Freeserve can consolidate its position.
Freeserve, which claimed to have 1.25 million active accounts by the end of May, plans to cement relationships with users by giving them preferred access to the stock offering and is taking minimum applications for shares valued at 250 pounds ($462.5m).
As with other internet stocks, Freeserve shares will be in short supply initially. Dixons has agreed not to sell any further Freeserve shares for the first year after completion of the offering and will not sell more than 40% of the shares in the second year.
Energis, the telco that makes Freeserve’s business model viable by handing over a portion of the interconnection fees, is to subscribe for 1.75% of Freeserve’s shares and will take up a further 2% over the next four years.
