On June 1, it was reported that the Securities and Exchange Commission (SEC) has come up with a draft memorandum circular for the increase in the public float of Philippine-listed companies. But, what is a public float? And what does this entail? Allow me to explain.
A float denotes the shares of a company which are freely bought and sold to the public. These are regular shares that companies issue to the public which in turn are available to be traded by investors. A company will usually identify their float by deducting their restricted stocks, which are shares that cannot be bought or sold absent a special permission from the SEC and are usually issued only to executives and directors, from their outstanding shares or shares that the company has actually issued.
However, a company must first know how much shares they are capable of issuing or how much authorized shares they have. To further understand these let’s take as an example Company QRS which has 1000 shares to be issued. The Company decides to hold an IPO (initial public offering) offering 200 shares and while at the same time providing another 200 shares to its executives.
In the example, the company has a total of 1000 authorized shares and 400 outstanding shares. The 200 shares they provided to their executives are the company’s restricted shares. Now, if we deduct the said 200 restricted shares from the 400 outstanding shares, we will get 200 shares of the company as the float which was offered in the IPO.
From this illustration, we can infer that a float is a very important number. It is how an investor in the stock market will know how many shares are actually available to be sold and bought by the general investing public.
Now that we have an idea what public float really means, this news about its planned increase is really a great opportunity. The SEC said that the memorandum circular, once approved, would hike the current public float from 10% to 20%.
The measure, in particular, will make “those planning to list their shares for the first time to comply immediately with a 20% minimum public ownership requirement, while those already listed will be required to increase their public float to at least 15% on or before the end of 2018, and then to at least 20% on or before the end of 2020.”
Therefore, this wonderful chance allows us investors to be able to buy more shares in the stock market. What’s even better is that the SEC is eyeing for it to start on the month of July! So, what are you waiting for? You better save up and be ready to buy more shares!
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