When Country Bumpkin lists on AIM, its shares become publicly tradable for the first time.
On the first day of trading, its shares are chased up from their listing price of 80p to a high of 105p before settling at 100p at the day's close.
There is strong private investor interest in the shares. Individuals who were denied access to the flotation on AIM are able to buy shares on the open market, which expands the share register and improves the liquidity of the stock.
You are one of the new private investors, buying 1,000 shares in the company at 100p each. At the close of the first day your shares are worth exactly what you paid for them, but of course you incurred Stamp Duty and commission charges in buying them, so you're down a bit.
What have you got for your money? Let's take a quick snapshot of the company:
| Shares in issue: 10 million Current share price: 100p Market Capitalisation: £10m Net assets: £7m Net asset value per share: 70p |
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| Turnover: £6m Profits before tax: £1m Profits after tax (net earnings): £670,000 |
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| Earnings per share (eps): 6.7p Price/Earnings ratio (P/E): 16 |
These figures tell part of the story. But as an investor, your main interest is in the company's future, not its present. What do the directors plan to do with the £2m raised, and how will that translate into dividend income and capital growth?
To answer these questions, you need to flick to their prospectus.
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