The Botswana Stock Exchange (BSE) has urged listed companies to increase the amount of free-float shares in order to increase trading and boost liquidity.
Free float is described as all shares held by investors, other than restricted shares held by company insiders.
Currently, listed companies are supposed to have 20 percent of their shares in the hands of outside individual investors.
BSE deputy chief executive officer, Thapelo Tsheole explained that a company’s free float is important to potential investors because it offers insight into the company’s stock volatility.
It is understood that stocks with small free float tend to be more volatile because there are only a limited number of shares that can be bought or sold in the event of major trading news. For the same reason, companies with larger free floats are generally less volatile.
Tsheole said after the new listing requirements have been approved, the percentage for free-float will gradually increase to 30 percent.
Market analyst at Motswedi Securities, Garry Juma said it is good that the BSE is encouraging free float of shares as this allows more shares to be available for trading and this promotes price discovery and market dynamism.
“More shares offered for trading improve trading flows and allows investors much room to either buy or offload the company at any given time easily as there will be readily available buyers and sellers in the market,” he said.
Meanwhile, Juma expressed concern at the recent reports that African Copper is considering de-listing from the BSE. He stated that any subtraction in terms of listed companies on the local bourse is not good for the market as it reduces the number of alternative investments that investors can have access to.
He however applauded the BSE, saying that the bourse has done a lot to attract more companies to list on the BSE.
“We are still a small market, but BSE have done a great job to attract new companies and products. Companies like FSG Limited, New African Properties, Letlole La Rona and Chopppies have all come on board. The BSE have also introduced new exciting products into the market such as Exchange Traded Funds (ETFs),” he said.