It all looked so bright for QXL.com earlier in the year. The online auctioneer's shares touched 800p, chief executive Jim Rose and his team were using their highly rated shares to snap up continental rivals and there was a growing feeling in the City that the UK upstart might actually beat the US firm eBay to European domination.
Analyst Thomas Bock at SG Cowen in the United States even came out and said it was only a matter of time before the shares hit £44.
Seven months later QXL shares are trading at just 31p - a 96% fall from their high and less than half the 69p issue price. The paper-led acquisition strategy is in tatters and Mr Bock is keeping an extremely low profile. Analysts say the company needs to refinance in the next six months and a takeover by a European portal is likely.
So how did the wheels come off a company so dramatically that its market valuation fell from £2.6bn in March to less than £100m by October?
Analysts blame the fickleness of the market and the sell-off of hi-tech shares. Dealers say sentiment towards loss-making business-to-consumer companies is so negative at the moment that nothing appears to be underpinning the share price.
Confidence is unlikely to return quickly enough for QXL to raise money through a share issue. A strategic partner seems inevitable. Ironically, it was the acquisition that was supposed to have turned QXL into a serious rival to eBay that has been one of the most important factors in its undoing.
The £668m takeover of Germany's Ricardo.de has been beset with difficulties and the price was renegotiated when it emerged that Ricardo's revenues were not as strong as hoped.
The subsequent slump in QXL's share price has put an end to any further all-share takeovers for the foreseeable future. Investment bank analysts are less likely to follow the shares while the company's value is so low.
Mr Rose now faces having to complete the thorny task of integrating different management teams, cultures, and concepts, while keeping staff morale high as the value of their share options falls.
Even Mr Rose is likely to concede that a partner is now needed. At the end of June QXL had around £56m in the bank and was burning £15m each quarter. It needs to refinance within the next twelve months and find the cash that will take it through to 2004 when profitability is forecast. The longer it leaves it, the worse the terms of any deal become for shareholders.
eBay has long been touted as a possible suitor but the two firms have talked and eBay has said it is not likely to bid. One analyst said: "eBay is doing very well in Europe. It dominates Germany, is doing very well in the UK and is about to launch in France. It doesn't need QXL."
Lycos Europe has consistently been linked with a bid that analysts believe would increase stickiness on its own site. Lycos' £8bn merger with Terra Networks of Spain is due to be completed on Monday. Investment bank CSFB acts for both Lycos and QXL could then be tempted to engineer a merger of the two parties sometime over the next few months.
People close to QXL suggest Lycos may not be the most likely partner. Others include T-Online and Yahoo!
Third-quarter results are due towards the end of next month and QXL will be under pressure to give firm pledges on financing.
