The company I work for has recently been listed on the AIM stock exchange as part of our company performing a reverse takeover of a smaller plc company. I would like to buy some shares in the company because they pence in value at present. I havent spoken to the Finance CEO yet but was just looking for advice and how to go about. Sorry about the lack of information but I have to be careful about what I write on the internet regarding company privacy. I really know very little but I sounds a very good opportunity.
Last edited by: Pugugly on Thu 22 Jul 10 at 21:18
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Tim, whether the price is pence or pounds is of little importance - its the value that matters in the first instance. Are you getting a discount, or just buying them in the market? If the latter then you should view them as you would any other share, though you might have better information about your own company's prospects.
I have always been reluctant to hold a lot of shares in the companies I've worked for. In terms of risk, you already have significant exposure to the company. If it were to fare badly you could take a hit on your savings as well as your job and perhaps pension.
That said, a lot of people have done very well accumulating shares in their employer - equally a lot of bank employees lost some serious money in the recent crisis, having built up large shareholdings in the one company.
But don't take investment advice from me - I bought a material (to me) amount of BP the day before the rig blew up.
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I wont be having any discount, just see it as a good opportunity. Do I approach my employer or do I go through a stockbroker?
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Mappy will have all the gen, but I would have thought it was a broker Job,
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You can buy AIM shares through a stockbroker.
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When I wanted to buy shares at short notice I opened a Vantage account with Hargreaves Lansdown. They charge £9.95 per deal (+stamp) for infrequent transactions :
www.h-l.co.uk/investment-services/share-dealing
No connection with the company but it's worked alright for me (the shares, now that's a different question...)
Last edited by: Marc on Thu 22 Jul 10 at 22:40
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You might want to shop around depending upon how much you want to buy and what trade size you expect.
I find Share.com very good in terms of a very usable site and very good customer service. They charge 1% + stamp, with a minimum of £7.50. You can also trade up to £25,000 for £7.50 but you then have to pay a £20/quarter subscription.
They offer some more advanced order types, such a trailing stops and limits, that you might not get with some other brokers.
I reckon that they have also gotten me fairly good prices on shares with poor liquidity (liquidity is generally poor on AIM).
By far the best discount broker is probably Interactive Brokers, but they do not have good coverage of AIM.
Last edited by: SteelSpark on Thu 22 Jul 10 at 23:22
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AIM shares.
1. Not all cheap (£10 per trade) brokers will sell you AIM shares.
2. AIM shares (save for those with another listing abroad on a recognised stock exchange) cannot go into an ISA.
3. Biggest problem is the "spread". There is little liquidity in AIM shares. If you buy BP for 401p, you can sell it for 399p. If your AIM share is listed with a "market" price of 25p, don't be surprised to have to pay 30p to buy it - and if you immediately try to sell it back then they may only offer you 20p.
The difference between the buy and sell prices is the "spread".
I suggest you go to talk to your colleagues and find out how they buy shares in order to avoid being stung by the spread. Often you can put a limit order in - so in the example above, put in a buy order at 25.5p, and maybe after a few days somebody wants to shift them and you'll get them at that price.
4. Don't forget HM Government will ask you for a further 0.5% in "stamp duty".
Last edited by: Mapmaker on Fri 23 Jul 10 at 10:11
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>> Often you can put a
>> limit order in - so in the example above, put in a buy order at
>> 25.5p, and maybe after a few days somebody wants to shift them and you'll get
>> them at that price.
I would say that you *must* use a broker that offers limit orders (as I mentioned above, some don't). If you don't place a limit order, you will just pay the top of the spread at that moment in time, and the chances are that you will be able to get a much better price by waiting (as MM says).
When buying shares with poor liquidity, the commission is often trivial compared to the impact of the spread.
If you were buying a small holding, say £500, and paying £10 commission to buy and then you are paying 2%, but due to poor liquidity there can easily be a 10% difference between two consecutive trades.
For example, I purchased some AIM shares earlier this week. The spread was about 5p-6p, I placed a limit order at 5.4p and it actually executed later that day at 5.3p (so that was about 12% than if I had bought at market).
You can see all the trades that have been made on a certain day at the London Stock Exchange website, and my trade was sitting between two others that had executed at 5.6p about a minute either side of mine, so my trade was 5.5% better off than those. Often that is down to the broker, which is why I say that I think Share.com seem to regularly get me good prices.
Of course, all of this is if you are buying via a broker, if there is some way that the company can acquire shares for you, it might be much better.
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Oh, one other thing. Definitely do research as mentioned above, and don't be thrown by the penny valuation. It means nothing, what is important is the market capitalization of the company (which is the number of shares x the share price).
It is important because, you could have a company that has a market cap of £1 million pounds, and it might have issued 1 million shares meaning that it share is worth 100p, or it could have issued 100 million shares which means that each share is worth 1p.
There are various ways to value companies, one is book value, which is assets minus liabilities. So, say that company had a book value of £500,000 it would be trading at twice book value.
The price to earnings ratio is also important, which is the net income/the market cap. So if company had a net income of £200,000 its P/E ratio would be 5.
There are many other ways (forward P/E, free cash flow etc), but I just wanted to give you a couple of examples to show the kind of thing that goes into it, and highlight that you do need to get a decent feel for whether these shares are good value.
You might find the following site useful for researching UK shares
www.digitallook.com/
One final thing. Penny shares do attract day trader types, who are speculating on short term movements, because, due to the poor liquidity, prices can shift around very rapidly.
But, if you are looking to buy and hold for a longer time, the penny valuation is irrelevant.
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IIRC all directors purchases have to be listed separately so see what they are doing. Once you have that knowledge, approach the Finance Director and see if you can get some further info.
If they have all disposed of shares recently spend your time updating your CV!
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>> 0.5% in "stamp duty".
Robbers, and in many other ways.
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Approach your employer, you may get a cheaper deal. Wouldn't hurt to find out.
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This is an excellent site for monitoring real-time prices, director deals and chat about your chosen company :
www.lse.co.uk/share-prices.asp
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Buying shares - Manatee
