The half million investors who have held their Eircom shares since the July flotation have been given another nasty shock after the shares plunged almost five per cent in heavy trading in Dublin and London. In Dublin, the shares matched their previous low with a 19 cent fall to €3.70 (£2.91), while in London - where over 2.7 million shares dealt - the shares were 18 cents lower on €3.72.
Despite an expectation of good interim results next week, Eircom is suffering from a movement of capital into what are seen as more go-go telecom shares. BT jumped almost two per cent to near an all-time high, while Thus - the spin-off telecoms subsidiary of Scottish Power - soared on its market debut, having been heavily oversubscribed.
Some dealers said that Eircom may suffer in the short-term from the arrival of Thus on the market, with the Scottish group's big Internet business seen as a major positive for investors. Eircom, in contrast, has a relatively modest business. Coincidentally, Horizon - the computer services group which Eircom attempted to buy earlier this year - is today expected to announce a flotation in Dublin and London and what some market sources said may involve a very substantial fundraising.
Banks also traded in volume, and Bank of Ireland finally bounced ahead of today's interims with a 12 cent gain to €7.98 (£6.82). Indicative bids for Ulster Bank were due in yesterday with a joint Bank of Ireland/ Irish Life bid still seen as favourite. Speculation that Irish Life will have to raise a large chunk of cash in the market to fund its share of the bid is retarding the stock, even though ABN-Amro believes that the return on investment on the deal would be in the order of 10-13 per cent for Irish Life, well in excess of the cost of capital.
