Global-Investor.com > Incademy.com > A company life map - the rise and fall of a hot stock

A company life map - the rise and fall of a hot stock

Introduction| Course| 626work.htm

18. Preparation for the main market

With Country Bumpkins' market capitalisation between £65m and £75m, it has reached a size where a move from AIM to the main list is feasible.

But why is Alan even considering the move?

• The key advantage of the main list is that it exposes the company to a wider range of investors than AIM. Many of the very largest institutional investors are not allowed to invest in AIM companies. Alan hopes that once CB is on the main list it will cross the radar of the big fund managers.
• If institutions buy CB shares, there will be upward pressure on the share price, and better opportunities for further capital raising.
• If the company grows large enough to enter one of the FTSE indexes, certain tracker funds will have to buy the shares.
• Main list companies are better researched by analysts. The more research that is produced, the more attention the fund managers pay to a stock.

There are, of course, disadvantages. The Main List is more expensive than AIM and the regulatory obligations are more demanding. Investors in AIM companies also enjoy tax reliefs not available in relation to Main List companies.

But is CB qualified to move up to the Main List? The company's nominated advisors run Alan through the Stock Exchange criteria:

1. Accounts
   The company must have published audited accounts covering a three-year period, and ending no more than six months before the planned flotation. **
2. Track record
   The company must have a trading and revenue-earning record covering the same period. The acquisitions it has made must also have a suitable track record.  **
3. Directors
   The company's directors and senior management must show they have appropriate collective experience and expertise to run all areas of the business, and must be free of conflicts of interest which might hamper their ability to do this. *
4. Working capital
   The company must be able to show it has enough working capital for its current needs and for at least the next 12 months. **
5. Independent operations
   The company must be able to carry on business independently and at arm's length from any shareholders with controlling interest - which generally means anyone with control of more than 30 per cent of the shares, or who can influence the appointment of directors.
6. Shares in public hands
   Once the company is listed, at least 25 per cent of its shares should be in public hands. **
7. Market capitalisation
   A company listing its shares on the market must have a total market capitalisation of not less than £700,000, and would normally be expected to be much larger. **

Alan Rooney is advised that technically CB could move up. They recommend that he strengthen his board with some well known City names, and take steps to bring the company in line with the Cadbury Code on Corporate Governance.

They also advise that, since the company is already on AIM, the listing procedure would be much simpler than normal.

1. Country Bumpkin - the early days 2. The decision to go public 3. AIM flotation by a placing of new shares 4. AIM flotation by an offer for sale 5. AIM flotation by tender offer 6. AIM flotation by introduction 7. First day of public trading on AIM 8. A growth strategy 9. End of lock-in period 10. The acquisition trail 11. Rights issue 12. Scrip issue 13. Preliminary results announced 14. Full results announced 15. Rumours of a deal - clarifying announcement 16. Takeover of rival - cash and shares deal 17. Convertible loan stock 18. Preparation for the main market 19. Admission to the main market 20. Move into FTSE 250 21. Share split 22. Share buyback 23. Director sells shares 24. New York-led collapse of tech stocks 25. Suspension of shares 26. Hostile bid for Country Bumpkin 27. Liquidation

Recommend Reading