World Online

» see worldonline.nl as it lived, on the wayback machine

~ the obituary ~

In March 2000 I was getting online at home in Turkey over a dial-up line billed by the minute. In the Netherlands that exact act, a person picking up a modem and calling an access number, was being valued at twelve billion euros.

World Online started in 1994 with a plain goal, to become the largest internet provider in the Netherlands, and by 1996 it was selling full service there. Then it bought its way outward. Access deals and small local ISPs across fifteen European countries plus South Africa, roughly 1.9 million customers by the start of 2000, most of them signed up under the free-access model that was eating Europe at the time. The financial position underneath was the ordinary one for that year. Revenues of about 64 million euros in 1999 against losses of about 91 million.

The float happened on Friday 17 March 2000, priced at 43 euros a share, with ABN AMRO and Goldman Sachs running the book. Fifty-seven of the sixty-four million shares changed hands on the first day. The price touched 50 in the morning and closed back at the offer, which was already a bad sign, and the second day closed sixteen percent under it. By 22 March the shares were at 31 euros. A twelve billion euro company had become a five billion euro company inside a week. The Nasdaq had peaked on 10 March, one week before the offering, so the timing was as precise as a person could manage without trying.

None of this could have happened where I was sitting. Turkish internet access in 2000 came from the state telephone company, and the pipe I dialed into was a public utility with a monopoly rather than a stock anyone could buy at the top of a bubble. The whole European free-ISP land grab and the collapse that followed it arrived in Turkey as foreign business news. I read about it. I did not lose anything on it.

~ the case file ~

~ what free access actually was ~

Free internet in 1999 Europe did not mean free. It meant the subscription line on your bill went to zero while the telephone line stayed exactly where it was. Local calls were metered, the ISP took a cut of the per-minute charge from the telephone company, and the longer you stayed connected the more the provider earned. Freeserve had proved the model in Britain in 1998 and every operator on the continent copied it within a year.

It produced subscriber numbers that looked enormous and meant very little. A free account costs nothing to open and nothing to abandon, so a company like World Online could report almost two million customers without knowing how many of them had dialed in that month. When flat-rate access arrived, the per-minute revenue that paid for the whole arrangement disappeared underneath it, and every free ISP in Europe had to find a second business or find a buyer.

~ the shares she had already sold ~

In December 1999, three months before the offering, Nina Brink sold the bulk of her personal stake to BayStar Capital of San Francisco for around 60 million dollars, at 6.04 dollars a share. The public bought in at 43 euros. Staff at the company had taken loans from their employer to buy shares at that price.

When the sale became widely known, the collapse stopped being about valuations and became about a person. Brink resigned in April 2000. James Kinsella came in that June and cut a hundred and fifty jobs out of the Rotterdam head office. Tiscali announced the takeover on 7 September, an all-share deal worth close to six billion euros that made the Italian company the largest ISP in Europe on paper. World Online was delisted on 12 January 2001 and the brand was folded into Tiscali over the next couple of years.

~ what the court decided ~

The Dutch investors' association took World Online to court along with the two banks that had run the offering, and the case lasted most of a decade. The Amsterdam appeal court found the prospectus incorrect and incomplete on four counts, and found that all three had acted improperly toward people who bought in the offering or shortly after it. The Dutch Supreme Court rejected the appeals on 27 November 2009.

The banks were held liable alongside the company for failing to stop an unjustified positive picture being put in front of investors in the days before the float. That ruling is still the reference point for prospectus liability in the Netherlands, which is a strange afterlife for an internet provider. Nobody remembers World Online for its dial-up service. It survives as case law.

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