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Spanish Net IPO surges
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November 17, 1999: 5:12 p.m. ET
Terra Networks rockets 185% to European lead due to Latin potential
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NEW YORK (CNNfn) - Spanish Internet provider Terra Networks saw its initial public offering almost triple in value Wednesday on its first day of trading, ending the day as Europe's biggest publicly traded Internet company with a market capitalization 10.3 billion euros, or $10.6 billion.
Terra -- the Internet unit of Spanish telecom company Telefonica, which provides Web access in Spain, Portugal and Latin America -- priced its IPO at 13 euros per share, above the anticipated range. The IPO price for its American Depository Receipts traded on the Nasdaq was $13.41. But when the shares began trading on the Madrid bourse at mid-morning, they immediately soared to 29.90 euros as investors scrambled for stock. It closed there at 37 euros, up 185 percent on the day.
When the markets opened in the United States, the shares were trading in an even higher range, leading to a U.S. opening price of 52. But as prices settled down in Europe, they also fell in the United States, and the stock trading at 38-1/4 at the 4 p.m. ET close.
Leaps to the European lead
Terra (TRRA) easily becomes Europe's largest listed Internet stock, far outstripping British ISP Freeserve (FRE), which is valued at 2.5 billion pounds, or 3.9 billion euros. They are still dwarfed by the $174.7 billion market capitalization of America Online Inc. (AOL), which would be the equivalent of 169 billion euros.
Freeserve was also a roaring success when it was offered during the summer, although its performance since then should serve as a warning to Terra shareholders. The stock has been a rickety performer, at one stage dropping below the IPO price of 150 pence, although it closed Wednesday at 250.75 pence, up 3.25 pence.
Just less than a quarter of Terra's capital was listed on the stock market, with the rest remaining in the hands of Telefonica. The Spanish telecom's stock closed trading in Madrid Wednesday at an all-time high of 18.21 euros, up more than 2 percent on the day.
Potential in the Americas
A combination of the potential exploitation of the Internet in Spain, and especially the burgeoning promise of Latin America, has made Terra the hottest IPO in Spain this year.
In less than a year, Terra Networks raised its number of clients to nearly 1 million by snapping up access and portal firms across Latin America in a $600-million spending spree.
The number of Internet users in Latin American is set to rise to 34 million in 2000 from an estimated 8.5 million in 1998, giving the region faster growth than much of the rest of the world, according to Terra's sale prospectus.
Some of the world's leading Internet companies also are staking claims in Latin America. America Online recently launched its operations in Portuguese-speaking Brazil where Yahoo! (YHOO), Microsoft Corp. (MSFT) and New York-based Starmedia Networks (STRM) are also setting up.
Well positioned for e-commerce
David Freddi, an Internet analyst at Standard & Poor's Marketscope in London, said Terra looked well placed to claim a big chunk of Latin America's e-commerce revenues once electronic shopping really takes off.
"As an early mover with a big market share in the region already, Terra Networks has a good chance of claiming a bigger chunk of e-commerce revenues in Latin America than America Online in the United States," he said.
Terra has warned it will make no profit for three years and the funds raised from its offering will be used to pay for expansion. As well as Latin America, Spain and Portugal, the company will seek to capture a chunk of the increasingly affluent Spanish-speaking market in the United States. 
-- from staff and wire reports
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Terra Networks
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