The Nigerian Stock Exchange recently released an elite list of listed companies that made it to its flagship Premium Board. The board according to the NSE, will feature companies that meet the Exchange’s most stringent listing criteria of capitalization, governance and liquidity.
Some of the criteria requires the companies to have a minimum market capitalization of N200bn and highest corporate governance standards. Companies aspiring to be listed on the Premium Board must achieve a minimum score of 70% on the stringent Corporate Governance Rating System (CGRS). In addition, they are required to maintain a minimum free float of 20% of their issued share capital or a free float value equal to or above N40 billion.
So how then did Dangote Cement make this list when it has less than 10% of its shares floating freely in the exchange? Here is what we think;
Caveat – Firstly, the minimum float requirement here came with a caveat that favours Dangote Cement. The Exchange insisted that it must be “equal to 20% of their issued share capital or a free float value equal to or above N40 billion. “. Whist Dangote doesn’t have up to 20% floating freely the value of the 9% it currently has is worth over N250 billion.
Free Float Extension – Dangote Cement obtained a free float extension last January when the NSE extended its compliance to October 2016. That in effect has exempted Dangote Cement from any restrictions it may have had to make this list. The NSE obviously knew this and had no choice but to insert that caveat (above).
Behemoth Dangote – Dangote Cement total market capitalisation is about N2.9trillion or 33% of Market Capitalisaton of the index. 10% of that (Dangote’s) size is about N290 billion and more than the entire insurance companies listed on the exchange. We already explained this in a prior article.
Based on the above, the Premium Board would have been non-existent without Dangote Cement. In fact, it takes up about 77% of the market value of the entire premium board made up of (Dangote Cement Plc, FBN Holdings Plc, and Zenith International Bank Plc with market capitalisation of N2.87 trillion, N277.70 billion and N587.43 billion respectively).
