By Kevin Murphy

Online auction house QXL Ltd has confirmed its plans to float on the London Stock Exchange and Nasdaq, in what could amount to the UK’s second-largest internet IPO.

Speculation in July said that the loss-making two-year-old firm could be worth up to $1.21bn, but a lower figure now seems likely. This huge valuation would put a price of $12,000 on each of the 100,000 registered users QXL claims to have, a far greater per-subscriber value than US auction giant eBay Inc boasts, with around 5.6 million users.

The firm will also have watched closely the progress of Freeserve Plc, the virtual internet service provider that floated at the beginning of August. Massively hyped and oversubscribed as the UK’s first big net stock, Freeserve’s share price rose to 2.22 pounds from an offer price of 1.50 pounds within the first day.

Predictably, once the net-stock novelty wore off its price began to slip back, despite a frantic talking-up by broker Credit Suisse First Boston Corp and is now close to the offer price, closing yesterday at 1.70 pounds. Likewise, the second-largest net stock, financial services site eXchange Holdings Plc, has been hovering around its placing price for the last four weeks, having achieved a first day premium of a mere 4.5%. Neither performance is likely to instill massive confidence in potential internet IPOs in the UK.

However, QXL’s business model is less volatile than Freeserve’s. Its core revenue stream is conducting its own auctions for consumer goods, flights and so on, setting a reserve price at cost plus markup. It also enables consumers to sell to each other. That service is currently free to use, but QXL tells us it will shortly start charging, possibly by taking a percentage of the sale price.

In the three months to June 1999, QXL made a loss of around 2m pounds ($3.2m) on revenue of 1.2m pounds ($1.9m). Its major investors include French billionaire Bernard Arnault’s Europ@web investment vehicle, which pumped in the equivalent of $30m to pay for QXL to stick posters in every train station and bus shelter in London. The London-based company operates sites in the UK, France, Germany and Italy, and faces not only local competitors, but is also facing possible competition from eBay, which is starting to make noises in Europe.

QXL is expected to issue new shares and list a quarter of the enlarged company to raise money for further marketing. Further details will be available September 9, and the retail offer registration process will close September 26. Credit Suisse First Boston Corp, which brokered the Freeserve IPO has been recruited as financial advisor.