IPO
WOL's IPO in 2000 proved a disaster and left the reputations of the banks, the Amsterdam stock exchange and the company itself tarnished.
It was set to be officially listed on the Amsterdam Stock Exchange on March 17, 2000. It was underwritten by ABN AMRO and Goldman Sachs, and promoted via a pan-European ad campaign involving hired celebrities like royal Sarah, Duchess of York, actor Christopher Reeve, and rocker Joe Cocker.
The initial price of the stock was set at €43, giving the company a valuation of €12 billion — the largest ever IPO for the Amsterdam exchange, and the largest IPO of any European Internet company. The initial offer on the AEX was 21 times oversubscribed.
However, not everyone was confident the company’s success was secure. World Online’s 1999 revenues totalled a mere €64 million, while net losses reached €91 million. More telling, while WOL was a giant in the Netherlands, it was a minor player in most of its other markets. It was not even among the top five players in the crucial markets of France, Germany, or Italy. Moreover, the €12 billion valuation assessed the company’s 1.9 million subscribers at a high €6,500 each. France-based ISP LibertySurf, which did an IPO the day before WOL's, valued its subscribers at less than €3,000 each.
In pre-launch trading in London's gray market, World Online's shares were going for upwards of €72. When the AEX opened on Friday, March 17, trading in WOL stock was fast; some 57 million of the 64 million new WOL shares were traded on that first day. Although the price rose briefly to €50, the upsurge was not to last. Trading had to be suspended three times after price falls, and the stock finally ended the day back at €43.
On its second day of trading, WOL tumbled 16% below its listing price. By March 22 the stock was trading at €31. The stock continued to fall over the next days; its value plunging from €12 billion to €5 billion in a week.
The tumbling share price coincided with the disclosure that Nina Brink had sold her stake in the ISP in December, prior to the flotation, for $60 million. A San Francisco-based private equity house, BayStar Capital, purchased her slice of the business at just $6.04 a share.
Dutch investors, including World Online staff who took up loans from the company to buy shares, were outraged. Many claimed that they would never have invested in the company in the first place if they had known Brink had already sold her shares. Though the prospectus noted that Brink had "transferred" her shares, aggrieved shareholders claimed that they were misled because the prospectus should have said she "sold" her shares to Baystar.
It later became known that, fearing a market collapse, the banks had wanted the WOL float to go ahead quickly. The AEX, however, had threatened to stop the initial offering because of Brink's pre-selling of most of her holding. ABN Amro responded by threatening an injunction against the exchange.
The AEX wanted Brink to lock up the shares transferred to Baystar, and $25 million being her participation in Baystar. She agreed to an extra lockup arrangement on shares she still controlled, and this was put in the prospectus. As a result of an apparent deficiency in Dutch law, it was not necessary for Brink's shareholding to be fully disclosed in the prospectus.
The exchange eventually permitted the listing after it was shown that Baystar had not agreed to a lock-up agreement to keep its shares for a time, as is usual in such situations. In fact, Baystar had been an aggressive seller from the first day of trading.
