What is the minimum amount of a company’s shares that should be freely floated if that company is incorporated in the UK and wants to join the FTSE’s UK indices?
A simple question, but a contentious one.
Investors and observers have been debating it with renewed intensity in recent weeks due to the corporate governance scandal that erupted at ENRC — a Kazakh miner that listed in 2007 with a free float below the UKLA’s requirements — and the intention of Russian gold producer Polyus Gold to also list with a smaller-than-stipulated (by the UKLA) free float.
Now the FTSE group itself is asking the question.
The index provider on Tuesday kicked off a market consultation to seek comment from “all sections of the investment community” on their views on the minimum free float requirement for index inclusion. The FTSE group wants to bring its minimum requirement, currently 15 per cent, in line with the UKLA rules needed for a premium listing: 25 per cent.
The group’s decision to embark upon a consultation process was at least in part prompted by the recent market debate on free floats and the number of requests it received to raise the minimum free float requirement to 25 per cent, it said in a statement:
FTSE acknowledges recent interest on the topic of governance and requirements for newly listed companies in the UK. The aim of this consultation is to address these requirements as part of an ongoing process to refine the Ground Rules of FTSE indices and achieve the highest possible standards in index design.
FT Alphaville will have more details on the consultation and free float debate later. But for now we leave you with this from the release:
If the consultation leads to a change in the rules, any FTSE All-Share stocks with less than 25 free float will be grandfathered to allow them time to increase their free float.
You have been warned.
To view and participate in the consultation, visit www.ftse.com/2011Consultation.
Related link:
“The paradox of small free floats” – FT Alphaville