Stock meltdown puts Estar on ice

By ROB O'NEILL

The Nasdaq meltdown has claimed its first local casualty, postponing the listing of Christchurch e-retailer EstarOnline.

Despite being fully subscribed, the company said yesterday it was putting its listing on hold due to the tech-stock slump.

Weekend Business understands at least one institutional subscriber was feeling concerned about its commitment to the issue. Money will now be returned to investors.

EstarOnline chief executive Matthew Darby said that with the Nasdaq slipping it was considered more prudent to put the listing on hold and come back when conditions had settled.

The cost of postponing the listing would be minimal. He described the decision as a "very tough call."

"We had the option of closing it and taking the money and running, so to speak. We took the action ... because we wouldn't have done ourselves any favours and our institutional investors wouldn't have been very happy if we had a negative reaction on day one."

The Nasdaq experienced its second steepest fall ever on Thursday, dropping 7 per cent after news of a disappointing outlook for Microsoft.

Locally, Advantage continued in free-fall to reach $4.33, down 34c for the day. Smaller e-stocks also suffered.

Yesterday, the Nasdaq notched its fourth straight loss, rallying 3.9 per cent until the last 45 minutes of trading to end down 2.5 per cent. It has fallen 27 per cent below its March 10 record high and 9.7 per cent this year.

Advantage regained some ground yesterday to $4.40 from $5.45 a fortnight ago. IT Capital was down 3c to 40c and Strathmore was down 1c to 31c.

Beauty Direct has logged two new lows in a row, reaching 16c on Thursday and 15c yesterday. E-Force and E-Phone similarly fell.

Mr Darby said the EstarOnline listing was not "do-or-die." The company would now return to the second board.

Paul Davenport, managing director of Deutsche Securities, which underwrote the issue, said private placements could be considered.

He described talk of a collapse in the business-to-consumer e-commerce market as a bit glib.

"You can talk about business-to-consumer, but I don't think that's the issue," he said. "The biggest knocker on the Nasdaq has been Microsoft."

Mr Darby said the business-to-consumer space was still viable. People had just realised the internet would not replace existing retail channels.

Simon Botherway, investment manager at Arcus Investment Management, formerly Spicers, said the market was starting to differentiate between stocks capable of generating cashflow and those with poorer prospects.

"In the last couple of quarters [we've] seen very little differentiation between good long-term prospects and those whose prospects aren't so good.

"I think you are going to see a lot more of that divergence," he said. "We are pleased to see a bit of that coming through into the market. People are doing selective buying."

Before the Australian markets had closed yesterday he noted that ERG, Cable & Wireless and Austar had all made significant gains.