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| 633

25. Suspension of shares

In June 2000, the Chief Financial Officer of Country Bumpkin has a private meeting with his CEO.

He reports that the first six months of sales at the former Seedcorn shops are well below expectations, and the refurbishment programme is costing twice what had been budgeted.

In effect, the 36 stores which CB had bought for £8m are not turning over £22m of sales and breaking even as Seedcorn has stated. They are turning over just £16m and losing money fast.

e-Bumpkins, meanwhile, is a disaster. JG's department has grown to 44 people, and burning nearly £200,000 per months in salaries and expenses. Traffic on the site is feeble, and sales negligible.

The CFO drops the latest trading figures on Alan's desk. For the 12 months to 30th July 2001, they project:

With 85 million shares in issue, the projected earnings per share are just 1.4p, compared to City expectations of 16p or more. The company will not be able to pay its next dividend and may even struggle to meet the interest due on its debenture.

This news is dynamite. Alan speaks to the company's lawyers and his broker who advise him that under Stock Exchange rules he is required to notify the Exchange immediately of any developments which could have an impact on the price of its shares.

The market, however, has beaten him to it. News of CB's problems has leaked, and is all over internet bulletin boards, driving the price of the shares through the floor. Alan speaks to the Stock Exchange and requests suspension of trading in the company's shares to prevent a disorderly market. The Stock Exchange, after consultation with the UKLA, suspends the shares at 18p.

Even if you want to sell your shares now, you can't. They are frozen until the Stock Exchange permits trading to restart. It won't do that until it is satisfied that order can be restored to the market, which will only happen when Alan Rooney has released a full clarifying statement.

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

Web www.incademy.com