FTSE Lifts Free Float Rule To 25% On Governance Concerns
December 14 2011 - 8:08AM
Dow Jones News
Responding to concerns that big shareholders can exert undue
influence on firms traded on London's FTSE 100 index, owner FTSE
Group is lifting its minimum free float rule to at least 25%, the
company said Wednesday.
FTSE, which operates indexes including the U.K.'s blue-chip FTSE
100, said in a statement that in a market consultation 83% of
respondents said the FTSE should apply a minimum free float
threshold of 25% for U.K.-incorporated companies in FTSE indexes.
The previous threshold was 15%, with exceptions for some very large
companies.
The move is designed to assuage concerns among investors that
companies without clear corporate governance rules can use
loopholes to be included in the index. Investment lobby groups and
corporate governance advocates have expressed concern that majority
investors are able to exert their influence over others in a FTSE
firm with a limited free float.
"With the guidance and direction of FTSE's independent
practitioner committees, FTSE regularly consults the market on
changes to the ground rules of its indices to ensure that the
indices continue to meet investors' requirements and define and
lead global standards in indexing. Both FTSE group and our
shareholder, the London Stock Exchange Group, recognize that this
strong stance on governance underpins the value of our
business."
The FTSE policy change will give companies whose free floats now
fall below the 25% threshold two years either to raise their free
float or lose their index status. It applies only to
U.K.-incorporated companies included in the FTSE All-Share index,
which includes the FTSE 100, the FTSE 250 index and the FTSE 50
index.
The rule will come into force for new entrants Jan. 1, 2012.
The five companies that would be affected by the policy changes
are Essar Energy PLC (ESSR.LN), Eurasian Natural Resources Corp PLC
(ENRC.LN), Evraz Group PLC (EVRZ.LN), Fresnillo PLC (FRES.LN), and
Ferrexpo PLC (FXPO.LN), people familiar with the matter said. All
are U.K.-listed resource companies in the FTSE 100 index and are
domiciled in the U.K.
-By Jessica Hodgson, Dow Jones Newswires; +44 (0) 7561 424788;
jessica.hodgson@dowjones.com