UK - Computer Faults Cause Chaos at Egg and Cahootgreenspun.com : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread
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June 13 2000 BUSINESS NEWS Computer faults cause chaos at egg and cahoot
BY CAROLINE MERRELL, BANKING CORRESPONDENT
June 13, 2000
TWO of the UK's biggest Internet banks were plunged into chaos yesterday after computer glitches affected the first day of trading in egg shares and bought Abbey National's cahoot venture to a standstill. A technology gremlin first struck at egg, the Internet bank being partially floated by Prudential. Many of the 85,000 retail investors were unable to sell their shares immediately yesterday, on the first day of trading, because they had been inadvertently given the wrong number for nominee accounts.
The error prevented shareholders from selling their shares early in the day, when the price reached a first-day peak of 190p. The shares then slid back to 177=p, ending the day up just 11 per cent over the opening price of 160p. Nearly 84 million shares were traded.
An egg spokeswoman said: "The problem was resolved in about 20 minutes. We only actually had about five complaints about it." About a third of the 85,000 investors opted to deal through nominee accounts, with the rest opting for share certificates, which take up to ten days to process.
At cahoot, Abbey National's Internet bank, the computer problem was more far-reaching, and lasted for the first day of the bank's operation.
The computer glitch occurred in cahoot's application system, which crashed within 90 minutes of opening for business. The system was swamped by thousands of people attempting to take advantage of the opening offer of free overdrafts and free credit cards for the first 25,000 successful applications. Would-be applicants were met with the message: "The system cannot find the file specified."
Abbey National initially closed down the Web pages completely to assess the nature of the problem. Towards the end of the day it restarted the system for short spells in an attempt to deal with the backlog but admitted it had not identified the cause of the breakdown.
Tim Murley, cahoot's managing director, admitted the problem was an embarrassment for the bank, which is spending millions of pounds on a promotional campaign, with the aim of attracting about 200,000 customers over the next 12 months. He said: "We are doing everything we can to resolve the situation. It would be wrong to say we have sorted it out completely."
He also confirmed that Abbey National was talking to a number of venture capitalists about the sale of a 20 per cent stake in cahoot, which could be a prelude to an eventual float of the Internet bank to follow in the footsteps of egg. Mr Murley would not be drawn on which venture capital firms had expressed an interest, nor would he comment on the estimated value of cahoot.
Shares in egg, which is now the UK's 12th-biggest bank by market value, were more than nine times oversubscribed. The flotation raised #86 million for Prudential, which retains a 78 per cent interest in the bank.
The offer was oversubscribed despite the fact many analysts had raised concerns about the long-term prospects for egg, as other Internet banks such as cahoot, intensify the competition.
The progress of both Internet banks will be watched by Halifax, which is also spending millions of pounds on its own separately branded Internet bank, IF, or Intelligent Finance. IF is to be officially launched next month.
-- (Dee360Degree@aol.com), June 13, 2000