Six companies, including Union Bank Plc and Wema Basnk have been listed as part of those that have not complied with the Nigerian Stock Exchange’s rule on free float requirement.
Free float represents the portion of shares of a corporation that are in the hands of public investors as opposed to locked-in stock held by promoters, company officers, or controlling-interest investors.
Going by the listing requirement of the NSE, all listed companies must maintain a minimum free float for the set standards under which they are listed in order to ensure liquid market in their securities.
For instance, the free float requirement for companies on the main board is 20 per cent and 15 per cent for Alternative Securities Market (ASeM) companies. This implies that 20 per cent of issued capital of companies listed on the main board of the exchange must be available for trading.
The NSE had listed seven companies with free float deficiencies at the beginning of the year to include Dangote Cement Plc, Union Bank of Nigeria Plc, Capital Hotel Plc, Great Nigerian Insurance Plc, Chellarams Plc, Nigerian Ropes Plc and Wema Bank Plc.
Wema Bank Plc was given July 31, 2014 to comply with the listing requirement while Dangote Cement Plc, which has 7.19 per cent deficiency is expected to comply by October 2016. Union Bank with a 14.94 per cent deficiency has June 30, to comply and Great Nigerian Insurance Plc which has a free float deficiency of 16 per cent has July 2016 to comply.
Capital Hotel Plc, Nigerian Ropes Plc and Chellarams Plc with deficiencies of 2.23 per cent, 5.20 per cent and 13.96 per cent to comply on April 2016, January 7, 2014 and December 2014 respectively.
NSE inside sources however said that Wema Bank formally informed the exchange of its compliance with the requirement through a letter dated July 31, 2014.
According to the source, one of the core investor of Wema Bank, Odua Investment Limited, divested about 150 million shares, which represent 0.39 per cent of the bank’s issued share capital.
The NSE compliance report is a transparency initiative of the exchange which was designed to maintain market integrity and protect the investors by providing compliance related information on all listed companies.
According the NSE, listed companies are required to adhere to high disclosure standards which are prescribed in Appendix 111 of the Listing Rules.
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