Three years ago there were no publicly traded European Internet companies. Today the Neuer Markt lists an estimated 20 companies each month, the vast majority of which are tech-related. At the beginning of September, there were more than 50 in the pipeline. Retail investors are overwhelmed. Even institutional investors don't yet have the expertise or manpower to do research on that many new stocks.
Investment banks are responsible for the high valuations.
Under pressure to do deals and generate revenue, many are skimping on due diligence. Some of the newly public companies are clones of U.S.-originated ideas, with marginal viability as businesses. Ingo Queiser, an analyst at B. Metzler seel. We haven't seen the end of the rout,'' he says. Even more substantial equities are suffering from the blight, as investors discover the perils that face even established Internet companies.