A company life map - the rise and fall of a hot stock
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3. AIM flotation by a placing of new shares
In 1996 Country Bumpkin lists on the Alternative Investment Market, the stock exchange for small, growing companies.
- The company appoints a nominated advisor to advise on the flotation and a broker to handle the sharedealing.
- It submits an application and prospectus to the UK Listing Authority (UKLA) and London Stock Exchange (LSE) which contains:
- a description of the business and its capital structure
- financial information and a trading history
- details of the management, administration and supervision of the company
- recent developments and prospects
Note that the company is not obliged to make a profits forecast.
- The prospectus announces the company's intention to issue 2.5 million new shares at 80p each. This equates to one quarter of the company's post-flotation share capital, and puts a value of £8 million on the company.
- The company chooses to place the shares with institutions, in preference to an Offer for Sale, a Tender offer, or an Introduction.
- Private investors may be in a position to buy the new shares if they are a client of a broker who is involved in the placing. Otherwise they have to wait until the shares had been issued, and buy them on the open market.
- The effect of the flotation is to enlarge the company's equity capital by £2 million, and to expand the number of shareholders to 32, including the 24 institutional investors who took part in the placing.
- Once the shares start trading on the 'secondary market', new investors can buy shares on the open market, and the number of shareholders and their identities will change.
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