Historic Sri Lanka listed oil palm firms to go private after interventionist rule

[SrirangaVeteran]

May 06, 2014 (LBO) - Sri Lanka listed palm oil plantations in East Asia that date back to the British Colonial period are on track to be de-listed following an interventionist rule requiring a minimum 'public float'.

Shalimar (Malay), Selinsing, Good Hope and Indo Malay, were companies set up in then Ceylon to raise capital to start plantations in Malaysia at a time when plantations stock was traded in Colombo and it was a fledgling financial centre in Asia.

The firms are part of Sri Lanka's Carson Cumberbatch group, itself a British Colonial-era firm that served the plantations sector.

Sri Lanka introduced a 25 percent minimum public float rule for main board companies in last December.

The oil palm firms have been on a private path for some time.

Chairman H Selvanathan said the parent company had earlier made a voluntary offer to buy out minority shareholders and continued to pick up shares after that.

"..[T]he majority shareholder does not have any intention of diluting its holding nor does the Company intend to issue further shares in order to conform to the said Rule, and as such the Company is considering the option of de-listing from the Colombo Stock Exchange which would be done in consultation with the Regulator and required shareholder approval," he said in the annual reports of the companies.

Sri Lanka's Securities and Exchange Commission brought the rules following pressure interventionists who wanted to force companies to maintain what is called a 'minimum public float'.

Critics say the collective-punishment style rules were originally pushed by European interventionists as a solution to tackle collusive market behavior in illiquid companies, though it is not known which percentage of a company actually discourages such behavior.

Stock manipulations usually happen during credit bubbles, when low interest rates persist and worsen when rates are kept down through state interventions.

There is also quicker price discovery in liquid shares.

Regulators around the world have picked various percentages ranging from 10 to 25 percent as the so-called minimum public float, where non public shareholders are the key promoters of a firm.

Further underlining the subjective nature of such percentages, India brought rules in 2010 where state companies have 10 percent floor, compared to 25 percent for others.

There are also quantity rules, where larger firms are allowed to have lower 'public floats'. Sri Lanka's tiny bourse has a minimum quantity rule of 5 billion rupees, about half that of the New York stock exchange.

Countries like the US and UK, also have smaller stock exchanges that firms can move to when they fall beneath the minimum public float but Sri Lanka has only one stock exchange.

It however has a lower limit of 10 percent for its second board.

The negative outcome of such rules are that well-managed firm that give steady dividends are pushed out of the market despite the availability of investors who are prepared to hold on to illiquid shares out of free choice.
http://www.lankabusinessonline.com/news/historic-sri-lanka-listed-oil-palm-firms-to-go-private-after-interventionist-rule/726059176

[yellow knifeTop contributor]

one bad decision from SEC

[BackstageTop contributor]

one bad decision from SEC

Carsons planned the de listing long before the min float rule.

[rainmaker]

What's the point of having a firm where only a handful of trades occur each year?

[SrirangaVeteran]

What's the point of having a firm where only a handful of trades occur each year?

Yes you got a point.


http://www.cse.lk/pdf/Section11_Fees.pdf

[BackstageTop contributor]

Now it is going to be interesting to see how much they offer and how KC Vigna will react to the price.