Sri Lanka’s SEC to revisit public float rule

ECONOMYNEXT - Sri Lanka’s capital market watchdog the Securities and Exchange Commission (SEC) is planning to defer a rule requiring companies to publicly list up to 20% of issued shares.

Companies listed on the main board of the Colombo Stock Exchange were required to increase their public floats to 15% of issued share capital by end December 2015 and increase it up to 20% by the end of this year.

“We will revisit this rule and hold public consultations during the first quarter of 2016, and then decide what needs to be done. There are calls for some relaxation on the minimum public float,” a top SEC official said.

Already several companies have delisted or plan to do so rather than increase their public floats by diluting their holdings.

Asiri Central Hospitals, Kuruwita Textile Mills, Beruwala Walk Inn, Finlays Colombo PLC, Carson Cumberbatch controlled Equity One PLC have already been delisted.

Carson’s Equity Two PLC and Pegasu Hotels were transferred to a secondary board. The group's oil palm units Selinsing, Shalimar, Indo-Malay and Good Hope will also be delisted. Metropolitan Resource Holdings PLC announced plans to delist earlier this week.

Royal Palms Beach Hotels, Colombo Investment Trust and John Keells PLC have requested to be transferred to the secondary board where the float is only 10%.

The 2013 budget offered a 50% tax cut for companies who listed before April 2014 and maintained a minimum 20% public float for the next three years.

In January 2014, the SEC issued a rule requiring listed companies to maintain a continuous public float of 20% by end 2016, a move viewed as overbearing regulation, despite the intension to generate more liquidity to attract investors.

Stock exchanges in Hong Kong, London and Oslo have a 25% minimum continuous public float requirement for listed companies. Indonesia is planning to introduce a 7.5% minimum float.

The US does not seem to have public float rules but companies that do have higher public floats are rated higher. Around 60% of S&P500 companies have free floats ranging from 98% to 99%. (http://marketcapitalizations.com/historical-data/public-free-float-sp-500/)

Facebook has a public float of 77%, Oracle Corp 74%, Wal-Mart 49%, Amazon 82%, GM 87%, Walt Disney 92%, Microsoft 93%, Coca-Cola 99%, Whole Foods 99%, General Electric 99.9% and Boeing 99.9%. Apple, AIG, Citigroup, Chevron, AT&T and Johnson and Johnson have 100% public floats.

S&P500 does not consider shares held by directors of a company, private equity and venture capital firms as public floats. (Colombo/January 05, 2016)