The Nigerian Stock Exchange disclosed over the weekend that eighteen companies’ shares are below listing standard due to the deficiency in their free floats.
The defaulting companies include those that are listed on both the main board of the Nigerian Stock Exchange, as well as those on the Alternative Securities Market, ASEM.
Note that while the NSE requires companies on its main board to have a free float of 20%, those on ASEM are required to have a 15% free float.
However, all of the eighteen companies on the latest report by the NSE fail to meet this requirement.
Below are the companies and the current percentages of the free floats
- Transcorp Hotels Plc: 6%
- Union Bank of Nigeria Plc: 14.94%
- Portland Paints & Products Nigeria Plc: 14.57%
- Global Spectrum Energy Services Plc: 7.01%
- CWG Plc: 15.97%
- Aluminium Extrusion Plc: 17.73%
- Union Dicon Salt Plc: 18.00%
- Austin Laz & Company Plc: 5.51%
- The Tourist Company of Nigeria Plc: 3.58%
- Interlinked Technology Plc: 14.50%
- Infinity Trust Mortgage Plc: 3.50%
- Great Nigeria Insurance Plc: 16%
- e-Tranzact International Plc: 10.06%
- Ekocorp Plc: 11.84%
- Champion Breweries Plc: 17.17%
- Caverton Offshore Support Group Plc: 17.30%
- Capital Hotel Plc: 2.99%
- A.G. Leventis Plc: 11.64.
Why do these companies’ shares free float are deficient?
According to the NSE’s X-Compliance Report, companies listed on the NSE are expected to “maintain a minimum free float for the set standards under which they are listed”. This helps to make sure that the market is orderly and liquid for the trading of securities.
Not having a free float, therefore, constitutes a major breach of the NSE’s listing requirements.
It constitutes an infraction because it is a problem that could have been avoided if only these companies’ shares were not concentrated in the hands of directors and other related insiders.
Concentrating companies’ shareholdings in the hands of just a few individuals usually always predispose such shares to manipulation, hence making it impossible to ensure wealth distribution, liquidity and efficient pricing.
The NSE report stated that the defaulting companies have requested for extension of deadlines to meet the free float requirement. In the meantime, their requests are awaiting approval.