BRITISH technology shares were pummeled for a second day yesterday as waves of uncertainty surrounding the sector continued, despite a recovery across similar stocks in the US.
The FTSE 100 dropped for the second day in a row, falling over 32 points to 6,590.69, hampered by the poor performance of tech stocks.
The top tech casualties yesterday were the UK’s recently floated online retailers including online food service Just Eat, which dropped a further 14p on its first day of unconditional trading to 250p, falling below its listing price from last week of 260p.
Boohoo and AO World also dipped below their flotation prices falling 4.3 per cent and five per cent respectively.
The slew of recent internet retail flotations and the rich valuations attached to them have led to worries that a tech bubble could be forming in the market, particularly around companies that justify their historically high valuations on the promise of future growth.
Concerns spread to online grocer Ocado, which saw its shares tumble 6.1 per cent to 396.2p and fashion site Asos, which is down 6.4 per cent since Monday’s open. Market fears were not just confined to London yesterday, shares in eDreams Odigeo – the first Spanish float since the country emerged from recession in 2011 – sunk more than five per cent on their first day of trading.
“If you look at growth as an investing style, and the stocks that are associated with that, they’ve had a hard time as of late… we are seeing growth stocks being hit because there is a growth scare out there,” BGC Partners market strategist Mike Ingram told City A.M. referring to valuations that are being based on future rather than current performance.
“All the initial public offerings we’re seeing, while generally a sign of confidence in the market, are also sellers cashing out and exiting – a lot of this money isn’t going back into companies,” he said.
The fears that started in the US on Friday around tech stocks were shaken off yesterday by some blue-chip tech firms like microchip designer Arm Holdings, whose shares climbed 1.2 per cent yesterday after a steep 2.4 per cent drop on Monday.
Analysts last night warned that tech stocks could remain under market pressure throughout the next six months.
“We expect the sector will feel under pressure through the summer and possibly until the next earnings upgrade cycle which is six months away,” Panmure Gordon technology analyst George O’Connor told City A.M.