Interactive Investor International, a personal finance website, soared in value to £550m on its stock market debut yesterday - even though it had sales last year of just £2.6m and made a loss of £6.3m.
Shares in the company began trading at 150p and finished the day at 335p, earning its 35-year-old founder and 15% shareholder Sherry Coutu a paper fortune of nearly £100m. But scooping the jackpot is Hollinger Telegraph New Media, a sister company of the Telegraph newspaper, whose £5m investment 15 months ago (topped up by loans last year) is now worth £156m.
The share offer was 26 times oversubscribed, with 82,000 small investors - a record for a UK internet float - applying for shares. But yesterday they bombarded the firm's chat rooms and bulletin boards with angry emails after allocations were scaled back to a flat 145 shares. By the end of yesterday's trading each parcel of shares was worth £485.75, a profit of just £268.25. For the 240 investors who applied for £50,000 or more worth of shares the news was even worse - they will not receive any stake and their cheques will be returned to them.
Many had expected windfalls of £1,000-£2,000 from the float. Small investors were particularly furious that 80% of the shares were set aside for institutional investors, even though the vast majority of applicants were the firm's own customers, who use the site to swap tips and information on hi-tech shares. Many threat ened to quit the site and switch to the firm's main rivals, Hemscott and Motley Fool.
But Interactive Investor's chief executive, Tom Carruthers, said the proportion of shares set aside for retail investors was higher than in other net flotations. "We believe this [20% allocation] is entirely appropriate and reinforces our ongoing commitment to our users. In addition, we believe this proportion is significantly higher than in previous internet IPOs in the UK."
Interactive Investor has 389,000 registered users for its service, which allows individuals to identify, compare and monitor financial products. Around half of its £2.6m revenues last year came from advertising and fees from product providers who obtain customers through the site. The other half came from consultancy fees from designing and building an online capability for other financial services providers.
"The market is valuing the company appropriately considering that we have the largest number of users and the longest running personal finance website in the UK," said Mr Carruthers, who holds a 3% stake in the company through option schemes.
