Perhaps the boom is already turning to bust.
The founders of Rocket Internet usually have a good sense of business and timing but luck failed them on Thursday.
The newly listed stock of the Berlin-based incubator of Internet start-ups, sold at the top end of the price range at €42.50, or $53.72, a piece, fell as much as 13.7 percent to €36.66 euros.
“First prices are below the IPO offer, that is not a positive indication” said Jochen Reichert, an analyst at Warburg Research.
Trying to emulate the success of Chinese e-commerce group Alibaba, which raised a record $25 billion two weeks ago on the New York Stock Exchange, the seven-year old Rocket Internet raised at least €1.4 billion ($1.8 billion), valuing the company at €6.5 billion.
Rocket Internet, founded by three German brothers who have the same rock star status in Germany’s business community as Facebook’s Mark Zuckerberg, came to market one day after one of its star subsidiaries Zalando floated.
The listing was the biggest sale of shares of a German Internet firm since the tail end of the dot.com boom when software firm T-Online International raised €3.1 billion in 2000, according to data from Deutsche Börse and Thomson Reuters.
“Understanding the company’s business model and evaluating it is difficult. It is complicated to value. All these factors add to the point that Rocket Internet is a risky investment.”
But market sentiment has changed since Alibaba’s debut, and investors are nervous in the face of growing uncertainties about global economic growth and monetary policy in the euro zone and the United States.
In the United States, the S&P 500 index and Dow Jones index fell more than one percent each on Wednesday, and the German blue chip index DAX was down 0.6 percent on Thursday after losing almost one percent the day before.
The share of Rocket Internet, set up by Marc, Oliver and Alexander Samwer, traded down 5.2 percent at €40.30 by 1055 local time on the Frankfurt Stock Exchange.
Rocket’s former investment, German shoe and fashion retailer Zalando fell more strongly in Frankfurt after listing a day earlier. The Zalando stock was down 7 percent at €19.99, compared with an issue price of €21.50.
Mr. Reichert said there was also still uncertainty over Rocket Internet’s business model.
“Major assets are in India, Russia, Latin America and South East Asia. There are volatilities in these regions. Understanding the company’s business model and evaluating it is difficult. It is complicated to value. All these factors add to the point that Rocket Internet is a risky investment,” Mr Reichert said.
Rocket Internet and Zalando both hoped to list at a time when investors globally appeared keen to tap into new online businesses.
Their performance will be watched closely by other tech stocks including online market place and retailer Scout24 and German cable television operator Tele Columbus who are also planning their own flotations. Tele Columbus had said on Tuesday that it wants to raise at least €300 million to finance growth.
Rocket Internet, which funds and supports Internet start-ups in emerging markets such as India, Brazil and Nigeria, wants to become the leading Internet platform outside the United States and China.
Rocket Internet lost €13.3 million in the first six months of this year, on sales of just €66 million.
The company and its subsidiaries employ more than 20,000 people globally, but Rocket itself only employed an average of 237 people in the first six months of 2014.
It lost €13.3 million in the first six months of this year, on sales of just €66 million. In 2013, Rocket made a net profit of €174 million, but only after spinning off Zalando, whose results no longer are counted by Rocket.
The 11 companies Rocket Internet labels as “proven winners” in its prospectus had a total net loss of €442 million on sales of €757 million in the last financial year for which data was available, the sales document showed.
The three Samwer brothers, who own about 41 percent of Rocket Internet’s shares and are, for now, paper billionaires, have a long pedigree in digital terms.
In 1999, they founded Alando, an online market place similar to U.S.-listed eBay. Only a few months later, they sold the start up to eBay for about $30 million . In 2004, the Samwer brothers sold ring-tone Website Jamba for $273 million to U.S. Internet firm Verisign.
Gilbert Kreijger is an editor for Handeslblatt Global Edition and has covered companies and markets across Europe. Lára Hilmarsdóttir has reported for several publications. To contact the authors: Kreijger@handelsblatt.com, L.Hilmarsdóttir@vhb.de