FTSE is proposing to introduce higher barriers for entry to the UK’s flagship stock market indices.
This comes on the back of rising interest from Russian companies in obtaining a premium listing and blue-chip status on the FTSE 100.
Investors hailed the proposal, suggesting that companies with a low share of free float and murky corporate governance standards could otherwise easily appear on the prestigious list.
FTSE is eyeing raising the minimum waiver on free floats for new companies.
“At least 25% of companies’ shares should be traded as a free float for the public,”
The Financial Times says.
Chris Woods, head of group policy at FTSE, says the issue has gained momentum recently due to Russian demand.
“We have been thinking about this measure already for some time, and the current trend with significant increase of requests from Russian companies, mainly from the resource sector, to list on the London Stock Exchange, requests comprehensive action.”
The new FTSE regulations would be stricter than those imposed by the UK Listing Authority (UKLA). At present, there are just four companies in FTSE 100 with free floats of less than 25%.
Russia’s largest gold producer Polyus Gold will need to increase its free float to 25% from 13% if a transaction between Polyus Gold and Jersey-registered Polyus Gold plc. is finalized, allowing the latter to obtain a listing on the FTSE 100.
Russian steelmaker Evraz has a permissible free float waiver of 25%, giving the company more opportunity to appear on the FTSE 100. Whereas fertilizer manufacturer Uralkali currently has just over 15% of shares trading on the LSE, but hopes to obtain a premium listing in London.
Currently, UK incorporated companies, which are granted a premium listing by UKLA, have an automatic passport to the FTSE indices, with more than 75% of shares remaining out of public hands.
Nikita Ignatenko, analyst at InvestCafe, says the new requirements have pros and cons.
“The measure will determine the FTSE chart and will ensure trading of more liquid, dependent on the market fundamentals shares. Now, almost all companies with a premium listing are considering increasing the free float to the necessary minimum, which can lead to short-term reduction in value of the shares of these companies, but also to improved liquidity in the medium term.”