The Nigerian Stock Exchange, NSE, has blacklisted 23 companies for deficiency in free float of shares as stipulated in the post-listing requirements for quoted companies.

The NSE has also flagged five other companies that are undergoing delisting process for failure to comply with the post-listing requirements of the Exchange.

The companies that have free float deficiency are: A.G Leventis Plc, Union Bank of Nigeria Plc, Prestige Assurance Plc, Champion Breweries Plc, Caverton Offshore Support Group Plc, Capital Hotel Plc, Cement Company of Northern Nigeria, CCNN Plc, Ekocorp Plc, e-Tranzact International Plc, Infinity Trust Mortgage Plc.

Others include: The Tourist Company of Nigeria Plc, Transcorp Hotels Plc, Portland Paints & Products Nigeria Plc, Global Spectrum Energy Services Plc, CWG Plc, Aluminium Extrusion Plc, Union Dion Salt Plc, Austin Laz & Company Plc, Notore Chemical Industries Plc, Medview Ailine Plc, Skyway Aviation Handling Company Plc, Omoluabi Mortgage Bank Plc and Ellah Lakes Plc.

Free float rule states the minimum number of shares required by promoters of public companies listed on the NSE to release to the investing public for trading at the stock market.

Companies listed on the Exchange are required to maintain a minimum free float of their shares for the set standards under which they are quoted in the Exchange in order to ensure that there is an orderly and liquid market for their securities.

Three of the blacklisted companies have requested for additional extension of time which will be presented to the NSE Council for approval. They are Portland Paints & Products Nigeria Plc, Global Spectrum Energy Services Plc and CWG Plc.

It was also gathered that the NSE is currently engaging nine of the companies for them to indicate when they are likely to meet the free float of shares requirement.

Company’s deficiencies

Details show that A.G. Leventis is recording 8.2 percent free float deficiency and was blacklisted as Below Listing Standard (BLS) with a pledge to comply to standard on October 19, 2020.

Capital Hotel Plc has free float deficiency of 2.7 percent and was blacklisted as BLS. Its compliance due date expired October 31,2017.

Champion Breweries has 2.83 percent free float deficiency and blacklisted as BLS with expired compliance due date of March 31, 2017. Ekocorp Plc has 7.36 percent free float deficiency with expired compliance due date of October 31, 2017.

eTranzact has 2.23 percent free float deficiency and blacklisted as BLS with expired compliance due date of May 17, 2019. Infinity Trust Mortgage has 16.5 percent free float deficiency and blacklisted as BLS with compliance due date on May 17, 2021.

The Tourist Company of Nigeria has 18.25 percent free float deficiency and is currently In-Delisting-Process, (IDP). Transcorp Hotels has 14 percent free float deficiency and is blacklisted as BLS with compliance due date on May 18, 2020. Union Bank has free float deficiency of 9.61 percent and is blacklisted as BLS with compliance due date on May 18, 2020. Portland Paints has 5.43 percent free float deficiency and blacklisted as BLS. Global Spectrum has 12.99 percent free flat deficiency and blacklisted as BLS.

Other companies include: CWG with 4.03 percent free float deficiency; Aluminium Extrusion 2.01 percent free float deficiency; Union Dicon Salt 2.0 percent free float deficiency and blacklisted as Below Listing Standard and Missed Regulatory Filing (BMR).

Austin Laz & Company has 0.64 percent deficiency and blacklisted as BLS; Notore Chemical has 9.08 percent free float deficiency and blacklisted as BLS; Medview Airline has 5.84 percent free float deficiency, Skyway Aviation has 1.61 percent free float deficiency and blacklisted as BLS; Omoluabi Mortgage has 18.04 percent free float deficiency; Ellah Lakes has 6.17 percent free float deficiency and blacklisted as BLS; Cement Company of Northern Nigeria has 17.03 percent free float deficiency and blacklisted as BLS and Prestige Assurance has 1.05 percent free float deficiency and blacklisted as BLS.

High deficiencies

The top five companies with free float deficiency include: The Tourist Company of Nigeria (18.25 percent); Omoluabi Mortgage (18.04 percent); Cement Company of Northern Nigeria (17.03 percent); Infinity Trust Mortgage (16.5 percent); Transcorp Hotels (14 percent). Top five companies with less free float deficiency are Austin Laz & Company (0.64 percent)), Prestige Assurance (1.05 percent), Skyway Aviation (1.61 percent), Union Dicon Salt 2.0 percent and Aluminium Extrusion(2.01 percent).

The companies react

When contacted Union Bank said: “We are in talks with the Exchange as we have applied for extension of compliance.”

Meanwhile, a source close to Transcorp said: “The Company is aware of the free float deficiency and management is working closely with the NSE Council to meet the free float. We could have done this earlier before now but the market has not been favourable since last year but we hope that once the market is favourable, we will float more shares to the general public.”

Leventis said: “We are aware of it as we have sought for extension.” Other defaulted companies did not respond to text /email messages sent to them as at press time.

Stakeholders/operators’ reactions

Stakeholders and operators in the stock market have expressed discomfort with the degree of defaults in this regulation.

The Executive Vice Chairman, High Cap Securities, Mr. David Adonri said: “The inability of the companies to comply with the free float is worrisome. It is to ensure that stocks ownership in public companies is not concentrated in few hands and to prevent price manipulation and dearth of liquidity.

The earlier the defaulters comply, the better it is for the integrity of the capital market.” Managing Director/CEO, APT Securities & Funds Limited, Mallam Kasimu Kurfi said: “The situation depend on the market demand as long there is no demand it will take time to meet up the minimum flotation of 20 percent of the issued shares. You can see that despite effort of Dangote, still Dangote Cement Plc did not meet up with the minimum free float of shares over years after listing on the Exchange.

The better way is to give more time to the defaulters otherwise they may delist which is not good for the market.

In his remark, Managing Director/CEO, Sofunix Investment and Communications Limited and a Chartered Stock Broker, Mr. Sola Oni said: “The NSE requires quoted companies to have a minimum 20 percent of its paid up share capital as free float or at least the value of its free float should be equal to N40 billion on the day the company is admitted to the Daily Official List of the Exchange.

The philosophy of free float is to hedge against high level of lock-in shares held by the company’s promoters.

“However, companies that fail to comply with the requirement have breached part of The Exchange’s Post Listing Requirements which they signed to uphold. It portrays them as not transparent and reduces effective public participation in the companies’ ownership. This can attract sanctions from the Exchange.

“On the part of shareholders, a breach of free float rule obscures the real capitalization of such companies. It makes it difficult for shareholders to know the actual total value of a company for the purpose of investment decision.

This particularly affects stockbrokers and other investment advisers in their advisory services on such companies.”

Reacting, the spokesperson for Independent Shareholders Association of Nigeria, ISAN, Mr. Moses Igbrude, said: “When market regulators failed or choose to bend the laws or their regulations to favour some players this scenario will be the case.

Core investors

“Before now, core investors were not allowed to own more than 51 percent or 60 percent. This will allow for free float of shares. In the name of attracting certain companies to list on Stock Exchange the regulation was removed and the implication is what we are seeing in the market.

“The regulators also forgot that the strategic investors don’t trade their shares and it is the free float of shares in market that make prices.

“The removal or non-compliance to rule is one of the reasons why most delisted companies opted for that option, it made it a lot easy for a company with the intention to delist to gradually increase its percentage holdings over time by using their cronies to mop the shares.

Share price of such stocks can easily be manipulated and it doesn’t reflect true market price, the likes of AG Leventis, Dangote group of listed companies fall in this category.

“I strongly advise the NSE and SEC to have the boldness and confidence to address this issue if they really want to have a global or international market as they want us to believe.

A free float of companies’ shares is one major criteria to measure transparent and credibility of Stock Exchange.”

(Vanguard)

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