In a bid to make more of their equities available to the investing public, newly listed BUA Foods plc, Notore Chemical Industries plc, UPDC plc and Transcorp Hotels plc are among the seven companies that have set timelines to sell down the shares of their controlling investors.
Other companies that have provided their compliance timelines are Arbico plc, LivingTrust Mortgage Bank plc, and Prestige Assurance plc.
The NGX Regulation Limited’s (NGX RegCo) X-Compliance Report shows that no fewer than 21 listed companies on the Nigerian Exchange Limited (NGX) have majority of their shares still in the hands of controlling-interest investors as against being in the hands of public investors thereby making them deficient in the free-float requirement in line with listing rules.
What is a free float?
Free float represents the portion of shares of a corporation that is in the hands of public investors as opposed to locked-in shares held by promoters, company officers or controlling-interest investors. It provides a more accurate reflection of what public investors consider the company to be worth.
The float is calculated by subtracting the locked-in shares from outstanding shares. For example, a company may have 20 million outstanding shares, with 6 million of them in a locked-in position; this company’s float would be 14 million.
For instance, the listing of BUA Foods on the NGX creates access for public participation in the ownership of the company, contributes to the growth of the NGX and positions the company to access long-term capital.
They are to provide quarterly disclosure reports
“The Board of NGX RegCo considered and approved an extended time frame for the companies to regain compliance with the listings requirement. The companies are however required to also provide quarterly disclosure reports to NGX RegCo detailing their level of implementation of the compliance plans,” the report stated. BusinessDay check shows that only seven companies (about 33.3%) of the 21 companies the NGX Regulation Limited (NGX RegCo) listed provided their compliance due dates.
“The listing creates liquidity and tradability of BUA Foods’ shares for existing shareholders and an opportunity for the public to participate in the growth of BUA Foods. The liquidity and tradability will create price discovery for the shares over time.
“The Exchange has very thorough Corporate Governance standards that all listed entities must align with. BUA Foods is already dedicated to best Corporate Governance practices. The Listing provides a chance for the Company to further ensure transparency across its operations,” Ayodele Abioye, acting managing director, BUA Foods, said at the Facts Behind the Listing presentation.
The companies’ shares outstanding as against free float
These companies, their free float percentage and compliance due dates include Arbico (19.96%/June 15, 2023). Arbico, which has 148.5 million shares outstanding, trades at N1.03 per share on Tuesday, February 22. The company is listed on the building construction subsector of the Construction/Real Estate sector of NGX.
Shares outstanding refers to the total number of shares a company has issued, while the free floats are its shares that are publicly owned, unrestricted and available on the open market.
BUA Foods, which is listed on the foods products subsector of the Consumer Goods sector, trades at N61.4 per share. BUA Foods has outstanding shares of 18 billion units. BUA Foods free float is 0.17 percent and its timeline for compliance is January 4, 2023. The company on January 5, 2022, listed by introduction on the Main Board of The Exchange its 18 billion shares at N40 per share.
LivingTrust Mortgage Bank, which trades at N1.24 per share, has outstanding shares of 5 billion units. It is listed on the Growth Board of the Mortgage Carriers, Brokers subsector of the financial services sector. LivingTrust Mortgage Bank free float is 0.08 percent with regulatory compliance timeline of August 20, 2023.
This list includes Notore Chemical Industries with free float of 10.02 percent and June 15, 2023 compliance date. Notore Chemical Industries, which trades at a 52-week high of N62.5 per share as at Tuesday as against a corresponding 52-week low of N56.25, is listed on the agro-allied and chemicals subsector of the Industrial Goods sector of the NGX Main Board. Its shares outstanding are 1.612 billion units.
Prestige Assurance has 15.46 percent free float and August 20, 2024, compliance timeline. At 45kobo per share, Prestige Assurance with shares outstanding of 13.252 billion units heads back to its 52-week low of 40kobo per share.
Transcorp Hotels has 5.47 percent free float and October 3, 2023, timeline for compliance. Transcorp Hotels listed on the Hotels/Lodging subsector of the Services sector of the Main Board trades at N5.38 per share and has outstanding shares of 10.242 billion units; while UPDC, which has 4.98 percent free float and August 10, 2023, timeline trades at N1.07 per share. The company, which is listed on the Real Estate Development subsector of the Construction/Real Estate sector of the NGX Main Board, has shares outstanding of 18.559 billion units.
… and so what?
Stocks with smaller floats tend to be more volatile than those with larger floats.
The NGX RegCo transparency initiative
The X-Compliance Report is a transparency initiative of The NGX Regulation Limited (NGX RegCo), which is designed to maintain market integrity and protect investors by providing compliance-related information on all listed companies. The report shows companies that are still deficient in their free float. It also shows those that have applied for waivers from the Board of NGX RegCo, and have specifically provided compliance plans with tentative timelines to support their requests.
The companies that are deficient in their free float but did not provide time frame for compliance according to NGX RegCo are: Abbey Mortgage Bank (11.35%); Aluminium Extrusion Industries (16.27%); Austin Laz & Company (19.36%), Capital Hotels (3.18%), Champion Breweries (5.23%); CWG (15.97%); Ekocorp (12.64%); Golden Guinea Breweries (15.24%); Infinity Trust Mortgage Bank (0.94%); and International Breweries (11.07%).
The list also includes Medview Airline (14.16%); The Tourist Company of Nigeria (1.75%); Union Bank of Nigeria (12.95%), and Union Dicon Salt (18%).
NGX listing requirement
Companies listed on NGX are required to maintain a minimum free float for the set standards under which they are listed in order to ensure that there is an orderly and liquid market for their securities.
The free float requirement for companies listed on the Growth Board is a minimum of 10 percent of the issued and fully paid up shares or the value of its free float is equal to or above N50 million, for the entry segment. Also for Growth Board, a minimum of 15 percent of the issued and fully paid up shares or the value of its free float is equal to or above N50 million, for standard segment.
For ASeM, NGX RegCo rule requires a minimum of 15 percent of issued and fully paid up shares or the value of its free float is equal to or above N50 million. For the Main Board, it is a minimum of 20 percent of the issued and fully paid up shares or the value of its free float is equal to or above N20 billion; while for Premium Board, it is a minimum of 20 percent of issued and fully paid up shares or the value of its free float is equal to or above N40 billion.