BY NKIRUKA NNOROM
Some stakeholders in the capital market have expressed displeasure at the recent reduction by the Nigerian Stock Exchange (NSE) of the minimum float for public companies seeking listing in the stock market, describing the decision as ill informed.
Some shareholders that spoke to Vanguard observed that even if the float was reduced to mere five per cent, it will not achieve the objective of attracting more listing, adding that the decision was an attestation to the shallowness of the NSE’s management in handling the affairs of the market.
Public float is the amount of shares the promoter(s) of any company seeking listing in the exchange is required to sell to the members of public to qualify for listing. Before the revision of the NSE’ listing rule, the public float was 25 per cent for both main board and alternative securities market.
With the revision, the minimum float has been reduced to 20 per cent and 15 per cent for main board and alternative securities market respectively.
Reacting, Ambassador Olufemi Timothy, President, Renaissance Shareholders Association of Nigeria, noted that the reduction of the minimum public float was detrimental to the growth of the market, arguing that the NSE’s management is not vast in capital market and companies’ issuer matters.
For him, coaxing companies to list in the market was an indication of a failed system, adding that it would further widen the class gap between promoters and shareholders of quoted companies.
“You don’t have to bend your rules to attract more listing. You don’t have to force companies to list; the exchange has to prove that it deserves listing on for companies to come on board. The attractiveness of the market will force companies to seek listing, not the other way round. Dangote is planning listing his Dangote Cement on London Stock Exchange, and Oando Plc is currently listed on Johannesburg Stock Exchnage. Nobody coaxed them into doing that. If companies need your help, they will come,” he said.
“When public float was 25 per cent, we were shouting that it was too small because the owners can take decision without consulting the investors. With 80 per cent equities in the hands of the owners, it is no longer public companies,” he added.
He emphasized that what was needed was the restoration of public confidence which was eroded, saying that ‘no matter the number of companies that get listed, it will not impact the market with the level of confidence.’
Also reacting, Sir Sunny Nwosu, National Coordinator, independent Shareholders Association of Nigeria, noted that the NSE is not investor friendly, saying that the recent move showed that it has exhausted all ideas that would revive the market, adding that the management is not in tune with the needs of the market.
He said, “The NSE does not feel the pulse of investors. Some of the things the NSE has done in recent time shows they lack full understanding of the market. Everyday, the NSE and SEC do things that further ridicule them in the eyes of serious minded investors. There are lots of companies whose shares are not available for sale and they want to further reduce the number of public float. What they should be looking at is to change the minimum requirement for price movement in share prices.”
He noted that the level of compliance had been low, saying that promoters of some quoted companies hold as much as 90 per cent equity stake.
“While it was 25 per cent, they hadn’t adhered strictly to that position. What I observed is that the law has not being effective. If a promoter of a company is having 80 per cent equity stake, what effect will shareholders holding just 20 per cent have. No matter the advice you give him when it comes to decision taking, he will not take you serious,” he added.
Johnson Chukwu, the MD/CEO, Cowry Asset Management Limited, explained that the unintended consequence of the relaxation could be a reduction in market liquidity.