UK online auction house woos US investors

Stockholders in UK-based auction website QXL.com benefited from frenzied trading in US markets today, following the publication of a report by a European analyst.

The company's shares more than doubled in value to $51.97 after the release of research from Tom Bock, a European internet analyst for US-based financial services company SG Cowen.

Bock said that eBay, which dominates the US internet auction space, has a market capitalisation of about $25bn after two years of operation. This means that QXL, which may become the eBay of Europe in another two years, deserves a similar capitalisation.

Bock estimated that QXL's share price should currently stand at $333. Before the report was issued on Wednesday night, the company's shares were valued at $22.38.

However, the comparison is only based on market capitalisation and does not include discounted cashflow, which is usually one of the criteria adopted in analysing the prospects of loss-making internet startups.

This did not concern US investors, however. In after-hours trading, QXL's stock rose as high as $61 per share, following an interview with QXL chairman Jonathan Bulkeley on a US television station.

Although Bulkeley would not comment specifically on Bock's estimates, he said: "We are the dominant player in Europe in the auction space and I think we have a great chance of building a profitable business."

He said QXL has beaten Sotheby's and Christie's to auction Wembley Stadium and that the auction site is developing new technologies, such as support for Wap-based devices, that it might use to attack the US market.

Bulkeley, who was formerly chief executive of online bookseller Barnesandnoble.com, said he has no problem with the methodology of SG Cowen's report. "It's a way of looking at it and it seems OK to me," he said.