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Subject: Re: UKNM: 'lastminute share plunge catastrophe/disaster'
From: Ray Taylor
Date: Thu, 23 Mar 2000 16:04:03 GMT

From: Paul Gill <paul [dot] gillatemap-performance [dot] com>

> I wish them well, but their valuation is way over the top. Many private
> investors also believe that the float has been the catalyst for the
> mini-crash/correction in 'tech' stocks recently (the c.20% drop in the
> sector over the last week) - caused (as is widely believed) by the greed
> the banks running the LM floatation.

Most people who comment on dot-com stocks state that "they are overvalued."

Whilst, certainly, it is difficult to reconcile the share price of any of
the dot-com launches with any demonstrable value using factors such as sales
turnover, that does not mean that the stock in question is over-valued.

You have to remember that, first and foremost, the stock markets are markets
just like any others. Price is a function of supply and demand. If demand
goes up, so does price.

One of the biggest factors in pushing up the price of dot-com is the growth
in the number of retail investors and the obvious attraction of technology
stock, since the new retail investors are all on computer and online. There
is not enough internet stock to keep them satisfied, hence prices tend to
rise, not fall. Yesterday's fall was as much to do with the market as a
whole as anything to do with Lastminute.

Is this market stupidity? Is it a new South Sea Bubble? Perhaps it is. But
then again, perhaps not. As Martha has been saying to all the financial
hacks, the difference between the South Sea Bubble and Lastminute is that
Lastminute has a tangible product, a tangible service, and a business plan
indicating growth.

If Lastminute uses its newly gained working capital wisely, then they will
achieve sufficient growth that they will make their loyal shareholders
substantial profit. I have no idea if they will do this, or when they will
do it.

But why should they be forced to make profit this year? Or next year? Why
not have a five year profit plan (or whatever theirs is)?

When railways were first built in this country they reckoned a good 25 years
before investors saw any benefit. They often took longer, and sometimes
never hit profit. But can you imagine a railway owner being told "it's 18
years since you launched and you're still not making any profit."?

The investment in railways and the long pay-back time was a function of the
cost of steel working and digging bloody great cuts in hillsides.

Dot-com launches are creating entirely new brands in the fraction of the
time it would normally take to establish one. But if you were to compare the
cost of establishing Lastminute, with the cost of establishing, say, Tampax,
as a brand then I would reckon Lastminute to be real low cost and ultra
rapid growth of the brand awareness. But it still costs money. And the cost
should be regarded as investment in just the same way that paying gangs of
sweaty blokes to dig railway cuttings is investment.

I cannot understand why people think a new company should make profit in
year one. The first few years of a company's life should be spent building
the opearation and investing in the future, not paying off your

And in any case, investors expect to make their money on share price rises,
not on dividends.

And as far as over-valuation is concerned, we may all assume that dot-coms
are over valued, but everyone is forgetting that business is changing,
electronic commerce is taking over. The underlying structures of commerce
are being completely re-invented. A commercial revolution is happening right
under our noses and the very people who ought to understand this are the
ones who are relying on outdated notions of commercial value and business
structures to make sense of what's going on.

I tried explaining this to a stock-broker (who incidentally was much younger
than me and should have been more open to new ideas) the other day and he
just could not grasp the point.

Youngsters today! They are just soooooo old fashioned! He will be out of a
job within a few years.

It is a fundamental change.

It is a revolution.

If you want to understand it, think yourself into the 21st-century.

In ten or twenty years time people will marvel at the stupidly low prices of
dot-com stock at the very start of the age of electronic commerce.

Ray Taylor
Don't fear change. Embrace it.

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  Re: UKNM: 'lastminute share plunge catas, Paul Gill

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