Euronext drops on debut

July 6, 2001 Posted: 0845 GMT

LONDON (CNN) -- Shares in Euronext, Europe's No. 2 bourse, fell almost 10 percent on its debut on the Paris stock exchange.

The Amsterdam-based stock exchange, formed from the merger of the Paris, Amsterdam and Brussels bourses, saw its stock fall 2.37 to 21.63 in early trade.

In Paris, the CAC 40 benchmark index fell more than 1 percent, in line with global markets, amid a meltdown in technology stocks as more companies issue profit warnings.

The operator of the Paris bourse and the fifth-largest stock exchange in the world priced its shares at 24 each, at the bottom end of an indicated price range, valuing it at 2.8 billion ($2.5 billion).

Euronext sold 16.7 million new shares worth 400.8 million to spend on acquisitions, as it bids to strengthen its position in Europe and pip the London Stock Exchange to the No. 1 spot.

"They are coming to the market because they want to have some fair values on which to basically try to consolidate in the future," James Alexander, an analysts at investment bank Commerzbank Securities, told CNN. 

"When the LSE and the Deutsche Boerse were trying to merge there were a lot of issues that prevented that from happening. One of them, perhaps not the biggest one, but one of them was certainly there was no fair value, not obvious market value around."

The share price of Euronext is considered fair for the sector at around 20 times earnings, but then analysts say exchanges in general are pricey. Lower volumes in stock markets this year mean last year's strong bourse profits will not be repeated.

Euronext was originally planned to list in May but was forced to delay plans because of poor market conditions. There has been little change since then.

What has enabled Euronext to kick off at a relatively full price is the expectation of further mergers and acquisitions - with more than a dozen exchanges in Europe, Euronext may gobble up some small fish.

Existing shareholders sold 12.2 million share, valued at about 293 million. The offer was 1.6 times oversubscribed, according to underwriters ABN Amro, BNP Paribas and UBS Warburg.

European bourses are racing to sell shares to investors, as this offers a currency for acquisitions. Deutsche Boerse was the first to publicly list in February, raising 980 million in the process.

The London Stock Exchange, Europe's biggest stock exchange measured by the capitalizations of  the companies listed on it markets, meets with its shareholders on July 19 to get their approval for a full listing the next day.

European stock markets are under pressure from institutional and retail investors to merge, thereby slashing the cost of trading and offering more stocks through one-exchange trading platforms.

--CNN Business Correspondent Tom Bogdanowicz contributed to this article

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