Freeserve, pioneer of the free Internet service provider model in the UK, has seen its shares slump as its first results today showed spiralling quarterly losses that have sent a shiver through the city.
Freeserve, which listed in July this year, said operating losses before exceptionals rose to £5.23 million in the first 16 weeks from £0.81 million in the fourth quarter on the back of escalating operating expenses.
Sales, however, more than doubled to £3.38 million from £1.65 million in the previous quarter, which was in line with expectations. The number of consumers subscribing to the Freeserve service leapt 19 per cent to 1.4 million.
The free Internet service provider claims that active users - those having logged onto the service in the last 40 days - were growing by 14,000 a week since quarter end.
Freeserve claimed monthly churn rate fell 9.5 per cent in the first quarter from 11.9 per cent. It also maintains online time has gone up from 1.5 billion minutes in the fourth quarter to 2.2 billion minutes.
Despite subscriber growth, which Freeserve now claims makes it the largest Internet service provider in the UK ahead of AOL UK, the company has failed to hotwire its 150p share price offering. The price briefly hopped to 247.5p and now hovers within the 138p to 144p range.
The city has been watching Freeserve carefully and is becoming increasingly nervous about Internet shares.
UK based online auction house QXL.com has already suffered from a downturn in the valuation of European Internet stocks. The company recently said it would issue shares representing a quarter of its capital at between 180p and 205p next month. This would value it at around £212 million, way below the £1 billion figure originally mooted.
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