The Quotations Committee of the Nigerian Stock Exchange (NSE) has considered and approved an extended timeframe for six companies to restructure their share capital in a way to dilute the over-concentration of shares and free more shares for minority shareholders.
Recall that NSE had recently released names of 13 companies trading below the minimum volume of shares required for retail holding and public trading on their shares. NSE noted that the companies have free float deficiencies, a major infraction that may adversely affect the liquidity of its shares.
Free float, also called public float, is the number of shares of a quoted company held by ordinary shareholders other than those directly or indirectly held by its parent, subsidiary or associated companies, directors of the entity and their close family members and any single individual or institutional shareholder holding a statutorily significant stake.
The companies are however required to also provide quarterly disclosure reports to The Exchange detailing their level of implementation of the compliance plans
The six companies that have received waivers and extended deadlines include
- Union Bank of Nigeria (UBN) Plc
- Transcorp Hotels Plc
- Infinity Trust Mortgage Plc
- Great Nigeria Insurance Plc
- E-Tranzact International Plc
- AG Leventis (Nigeria) Plc.
The trio of UBN, Transcorp Hotels and Great Nigeria Insurance were given an extended deadline of May 18, 2020, while AG Leventis, E-Tranzact International, and Infinity Trust Mortgage were given up till October 19, 2020, May 17, 2019, and May 17, 2021, respectively.
Stock market regulations require companies to maintain minimum public float to prevent undue concentration of securities in the hands of the core investors and related interests, a situation that can make the stock to be susceptible to price manipulation.
It also provides the general investing public with an opportunity to reasonably partake in the wealth creation by private enterprises.
The implication of not meeting the deadline
Now that the NSE had granted another extension for the companies to restructure their issued share capital in a way to free the existing concentrated shareholdings of the core investors and allow more investments from the general investing public, failure by these companies to restructure their share capital at the expiration of the deadline or secure extension of the deadline may lead to the delisting of their shares from the NSE.