LAGOS, SEPTEMBER 28, 2017 – Union Bank of Nigeria (UBN) Plc and AG Leventis (Nigeria) Plc have applied to the Nigerian Stock Exchange (NSE) to grant them waiver and extend the deadlines for the restructuring of their share capital.
The NSE had given Union Bank and AG Leventis Friday, June 30, and July 31, 2017 respectively as deadlines to restructure their issued share capital to dilute the existing concentrated shareholdings of the core investors and allow more investments from the general investing public.
The latest report by the Nigerian Stock Exchange (NSE) on companies in violation of post-listing rules indicated that Union Bank and AG Leventis are still in violation of the listing requirement on free float, which mandates companies on the Exchange to have a certain minimum percentage of their shares in the hand of investing public.
A regulatory report at the Exchange indicated that Union Bank and AG Leventis have sought for extension of the deadlines.
Free float, otherwise known as public float, refers to the number of shares of a quoted company held by ordinary shareholders other than those directly or indirectly held by its parent, subsidiary or associate companies or any subsidiaries or associates of its parent company; its directors who are holding office as directors of the entity and their close family members and any single individual or institutional shareholder holding a statutorily significant stake, which is 5.0 per cent and above in Nigeria.
Thus, free float’s shares do not include shares held directly or indirectly by any officer, director, controlling shareholder or other concentrated, affiliated or family holdings.
Companies listed on the Exchange 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 in their securities. The free float requirement for companies on the premium and main boards is 20 per cent while companies on the third tier board, otherwise known as Alternative Securities Market (ASEM) are required to have 15 per cent free float.
According to the report, Union Bank has a free float of 14.94 per cent; 5.06 per cent below the required 20 per cent for the bank’s listing status on the main board of the Exchange. AG Leventis has free float of 11.64 per cent, 8.36 per cent below the 20 per cent free float for companies listed on the main board.
The report indicated that other companies, which have free float deficiencies have either started arrangements to resolve the deficiency or still have longer period to comply. For instance, Champion Breweries, which has a free float of 17.30 per cent, has obtained approval for restructuring while five other companies-Capital Hotels, E-Tranzact International, Ekocorp, Interlinked Technology, Transcorp Hotels, Caverton Offshore Supports Group and African Paints, are expected to resolve their free float deficiencies between October and December 2017.
Two other companies- Chellarams Plc and Infinity Trust Mortgage Plc have deadlines of February and May 2018 respectively.
Failure by any company under free float deficiency to restructure its share capital at the expiration of the deadline or secure extension of the deadline may lead to delisting of its shares from the NSE.
Free float deadline is usually in deference to application by the management of a company for some period to comply with the free float. However, the company is required to provide quarterly disclosure report to the NSE on the efforts being made to fully comply by the deadline.
At the expiration of the deadline, a company is mandatorily required to have completed partial divestments or dilution of the ‘non-public’ shareholdings to free 20 per cent equity for public holding, unless the management of the NSE grants fresh waiver and extension of the deadline. In the extreme instance, a company with deficient public float may opt to delist its shares.
Stock markets maintain minimum public float to prevent undue concentration of securities in the hands of the core investors and related interests, a situation that can make the stock to be susceptible to price manipulation. Besides, it provides the general investing public with opportunity to reasonably partake in wealth creation by private enterprises.