Exits – Lastminute.com generates market madness

Dot-com hype in the UK reached a new high during late February and early March as Lastminute.com, which effectively is a glorified ticket agency and gift shop, readied itself for flotation.

Frantic investor demand resulted in several price revisions before the issue price of 330p per share – nearly three times the level originally envisaged was fixed, valuing Lastminute.com at GBP571 million ($894 million). Even at that level, the issue was massively oversubscribed, and trading in the grey market produced a notional value of GBP800 million.

On 14 March, the first day of trading, shares peaked at 532.5 pence, but during succeeding days the market regained a degree of rationality and Lastminute.com fell back below its issue price.

Lastminute.com’s venture backers included Amadeus, Arts Alliance, Innovacom, NewMedia Investors, T-Ventures, Venture Partners and Viventures. Partners including BAA plc, Bass Hotels & Resorts, priceline.com Inc, Intel, Mitsubishi, Starwood Hotels & Resorts and Harvey Goldsmith also backed the company. The company, which has yet to celebrate its second birthday, was founded by Brent Hoberman and Martha Lane Fox. The most popular travel website in the UK, Lastminute has more than 570,000 subscribers. However, only around 5 per cent of subscribers have made purchases via Lastminute.com, whose turnover in the last quarter was GBP409,000. Last year, Lastminute.com made operating losses of around GBP30 million, a figure that is expected to increase by some GBP10 million in the current year. Judged by such mundane yardsticks, a valuation of GBP800 million does seem a touch on the inflated side.

But, whatever the fluctuations in its share price, Lastminute.com has succeeded magnificently in one of its aims. “What are we trying to do?” read a question on its (pre-flotation) website. The answer: “Lastminute.com wants to encourage spontaneous, romantic and sometimes adventurous behaviour”…

Some shareholders may now be considering that the price of adventure was pitched rather too high.