Surfers' paradise - for now
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Surfers' paradise - for now

Internet IPOs were once regarded as highly risky. Now they rank among the best-received offerings in the global marketplace. The rapid rise in internet use has driven the perception that service providers will be worth a lot of money, and now everyone is trying to get a piece of the action. Yet the euphoria surrounding recent flotations of internet stocks may be hiding a less rosy picture for hi-tech issuers as a whole. Peter Lee reports.

Is it back to business as usual in the hi-tech IPO market? Recent deals on both sides of the Atlantic - including flotations of the internet stocks and Earth Web in the US, and offerings such as DataDesign, Articon Information Systems and mb Software in Europe - suggest so. Investors are once again throwing their cash into the most volatile, thinly traded and under-researched sector of them all. Shares in, which helps people build their own websites as part of an online community and has not yet turned a profit, were priced at $9 at new issue in mid-November. They soared to $97 the next day, before slipping down to $41.50. Shares in Earth Web, another internet stock with little track record, went from $14 to nearly $85 before falling back to around $40.

During the recent market sell-offs, small-cap stocks suffered even more than blue-chip stocks. But now sentiment seems to have changed dramatically. "It is interesting that, as the markets have rebounded, the deals that have been most warmly received have been those that might be perceived to be most risky: internet IPOs," says Mike Dorsey, co-head of technology investment banking at Donaldson Lufkin & Jenrette in California.

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