Eighteen quoted companies have less than the required minimum volume of shares for public trading at the stock market.
This is a major infraction that may adversely affect liquidity and efficient price discovery on the companies.
A report by the Nigerian Stock Exchange (NSE) at the weekend indicated that the companies have free float deficiencies, a reference to over concentration of the shareholdings of the companies in the hands of directors, other insiders and related persons.
The overconcentration easily makes the companies’ share prices susceptible to manipulation and detracts from stock market’s objectives of wealth distribution, liquidity and efficient pricing.
Under the rules at the Exchange, companies listed on the premium board are required to have 20 per cent free float or more than N40 billion of their capitalisation in the hands of investing public. Companies on the main board are required to have a minimum free float of 20 per cent of their market capitalisation, implying that 20 per cent of the companies’ shareholdings must be available for minority retail shareholders. However, companies on the Alternative Securities Market (ASeM) are required to have 15 per cent free float.
According to the report, the defaulting companies are listed on the main board of the Exchange. The included Union Bank of Nigeria, which has a free float of 14.94 per cent; Capital Hotel, 2.99 per cent; Great Nigerian Insurance, 16 per cent; AG Leventis, 11.64 per cent; Interlinked Technology, 14.50 per cent; Infinity Trust Mortgage, 3.50 per cent; Transcorp Hotels, 6 per cent; Ekocorp, 11.84 per cent; Champion Breweries, 17.17 per cent; Caverton Offshore Support Group, 17.30 per cent; The Tourist Company of Nigeria Plc, 3.58 per cent and E-Tranzact International Plc, which has a free float of 10.06 per cent.
Others were Aluminium Extrusion, 17.73 per cent; Union Dicon Salt, 18.0 per cent; Austin Laz & Company, 5.51 per cent; CWG, 15.97 per cent; Global Spectrum Energy Services, 7.01 per cent and Portland Paints & Product Nigeria (PPPN), which has a free float of 14.57 per cent, 5.43 percentage points below the 20 per cent minimum requirement.
Authorities at the Exchange have already tagged the companies with a red alert of non-conformity with the requisite listing and corporate governance requirements. With the Below Listing Standard (BLS) tag, the deficient companies would have to undertake capital restructuring to reduce the overconcentration and free more shares for the general retail investing public.
Alternatively, deficient companies may opt to move […]