Free Float Deficiency: More Companies May Delist from NSE

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LAGOS, NOVEMBER 21, 2016 – There are strong indications that the decision of Ashaka Cement Plc to voluntarily delist from the Nigerian Stock Exchange (NSE) may lead to exit of some other companies which are in violation of the NSE’s free float rule.

The NSE rule stipulates that listed companies 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.

For instance, the free float requirement for companies on the Main Board is 20 per cent and 15 per cent for Alternative Securities Exchange Market (ASEM) companies.

However, some companies have free float deficiencies. Such companies have remained in the market due to waivers given to them by the NSE to comply. But Ashaka Cement disclosed last week it was delisting from the NSE and remained an unlisted public company. Shareholders of the company are expected to meet today to approve the proposal.

THISDAY checks showed that the decision of Ashaka Cement might have emboldened some of the companies which have free float deficiencies to also exit the NSE.

Some of the companies that have free float deficiencies are: Union Bank of Nigeria Plc, Capital Hotel Plc, Great Nigerian Insurance Plc, Chellerams Plc, Nigerian Ropes Plc, A.G Leventis Plc, Interlinked Technologies Plc, Transcorp Hotels Plc, Infinity Trust Mortgage Plc, Caverton Offshore Support Group Plc and African Paints Plc.

While most of them are enjoying a period of grace to comply, Chellarams Plc has applied to migrate to the ASeM. On the other hand, Nigerian Ropes Plc has stated its intention to delist from the NSE.

Stockbrokers to some of the companies told THISDAY that the companies are only managing to stay on and are looking for any opportunity to exit.

“As you may know, remaining on the NSE is not an easy thing. It is costly and very rigorous to comply with the listing requirements. Although the companies would ordinarily want to remain listed given the benefits, the challenging operating environment is making it difficult for many of them,” a broker said.

The broker disclosed that the decision of Ashaka Cement to delist is being seen as an opportunity for some of the companies to also exit.

“I must tell you that some of the companies that are not doing as well as Ashaka Cement are thinking of following that exit route.

They feel remaining on the NSE is expensive considering the fact that the economic headwinds are impacting negatively on their operations,” the broker said.

Directors of Ashaka Cement had explained that apart from the free float deficiency, neither the company nor any shareholders are benefiting from the continued listing as shareholders are not getting any exit opportunity and their investments have been locked up and they find it difficult to dispose of their shareholding.

They added that the company is bearing unnecessary cost in complying with its listing obligations.

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