BERLIN -- Once expected to become the most popular initial public offering in German history,
may be in for a rough ride when it begins trading on Monday.
Wretched market conditions for technology stocks and a number of high-profile IPO flops for European Web companies are threatening to turn T-Online's sale of roughly 100 million shares for an approximate $3 billion into a disaster of epic proportions. Despite being more than 16 times oversubscribed, T-Online's shares, in gray market trading, have dipped below the top of their 26 euro ($24.83) to 32 euro pricing range. DT felt the pain from T-Online's woes Friday, as investors sold its stock 4.62 euros lower, or 6.2%, to 70.01.
With Dutch Internet service provider
and leading U.K. travel Web site
trading roughly 50% lower than their respective IPO prices, and techs getting hammered the world over in recent weeks, Deutsche Telekom hasn't been presented with ideal floatation circumstances.
But unlike the two aforementioned companies, T-Online has a few factors going for it, which over the medium term could help it become a technology-sector gem despite a muted IPO.
As Europe's largest Internet service provider in the region's largest potential market, T-Online could prove to have an extremely bright future. Moreover, with the backing of Europe's largest telecom, investors may feel more confident about the company's long-term prospects than those of other, largely unknown Web start-ups.
And there are many people who have a lot riding on the success of T-Online's share sale. Besides floating its Internet unit, Deutsche Telekom wants to sell another tranche of DT stock in the summer and hopes to list its wireless operation,
, later in the fall. Thus, it can't risk alienating investors next week. The banks involved also have a vested interest to see a bloodbath avoided.
"Things may not be ideal," but with their plans for more DT shares and T-Mobil, "the consortium will likely be compelled to nurse things along," says Robert Halver, an equity strategist for
Delbrueck Asset Management
in Frankfurt. Halver believes that, despite the nasty market conditions, "the long-term prospects for technology shares remain good."
That's not to say things won't get ugly for T-Online in its first tender days trading on the
in the coming week. Thin trading volumes ahead of the Easter holidays could exacerbate the normally volatile nature of the technology, but postponing the IPO wasn't an option for Deutsche Telekom. "That would have been taken as a sign of weakness," says Halver. "At this point they just have to push on through."
Just how many investors decide to push along with DT and T-Online will be known at the closing bell Monday.