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

Introduction| Course| 616

8. A growth strategy

Country Bumpkin's listing prospectus sets out a four-pronged growth strategy:

1. Industry consolidation: buying small private businesses and achieving economies of scale
2. Centralisation: handling purchasing, distribution, accounts and administration centrally to reduce costs
3. Mail order growth: revitalising the company's direct mail business
4. Improving margins: replace low margin with high margin products, and use the company's growing purchasing power to get better terms from suppliers

The first day's trading, in which the share price rose from 80p to 100p, suggests that there is excitement in the market about Country Bumpkin's potential.

Within 4 weeks of the AIM listing, Country Bumpkin begins implementing its strategy. It buys a rival catalogue business and a chain of three loss-making garden stores for a total of £470,000 cash.

When news of these deals appears on the Stock Exchange's Regulatory News Service, it is interpreted as evidence of the company's ability to deliver. The share price rises to 126p.

• The company's broker produces a research report on the company which endorses the growth strategy and predicts rapid earnings growth in the next 18 months.
• Small company newsletters begin to write about the company and speculate on its earnings growth

Country Bumpkin becomes "a stock to watch".

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

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