The downward spiral which has resulted in more than half a million Eircom shareholders nursing losses on their July investment continued yesterday with no sign that the shares have yet reached the bottom.
In active trading in both Dublin and London, the shares lost another six cents to close on €3.80 (£2.99) - compared to the €3.90 (£3.07) flotation price of last July.
With stock markets all over the world weaker yesterday - Wall Street was down more than 100 points by the time the Irish market closed - dealers said that there is little reason to believe that the worst is yet over for Eircom investors. "The whole market has turned sour, and Eircom has suffered badly," said one dealer.
Institutional investors, who are the supposed natural buyers of the shares, are still showing little inclination to buy at these levels - a sure indication that the institutions believe the shares have further to fall before they bounce back. "The institutions think they can get in at a lower price and they are hanging back," the dealer added.
And with the entire European telecoms sector going through a period of weakness, there is little on the sectoral front to boost Eircom shares.
Eircom itself does not report its half-year results for another two months, so there is little that the company can say in the meantime that will underpin the share price, as it will enter a closed period within a matter of weeks.
Market sources said that the slump in the Eircom share price may have more far-reaching consequences and warned that unless there was a sharp reversal in Eircom's fortunes over the next 12 months, it would be extremely difficult to persuade small investors to put their money into other planned state privatisations such as Aer Lingus and the merged TSB/ACC bank.
"A lot of first-time investors are understandably feeling disillusioned at the way the Eircom share price has gone. They might have been warned that shares can go down as well as go up, but all the pre-flotation hype seemed to lull a lot of investors into a false sense of security and a belief that Eircom shares were a one-way bet. They have learnt a very quick lesson," said one private client stockbroker.
