If You Bought Stocks But Can't Sell them, You Should Read This
There is what is called the Company's Free Float. In the Nigerian capital market, the relationship between a company's Free Float and its Liquidity is the ultimate measure of how easily an investor can enter or exit a position.
The NGX Free Float Rules serve as the regulatory framework. Free Float represents the total number of shares that are actually available for everyday people to buy and sell on the exchange.
By mandate, a company needs to meet the free float requirement. And they're classified into boards;
•Premium Board
20% of shares are issued to the public or a worth of 40 Billion
•Main Board
20% are issued to the public or a worth of 20 Billion
•Growth Board (Standard)
15% are issued to the public or a worth of 500 Million
•Growth Board (Entry)
10% are issued to the public or a worth of 50 Million
These requirements ensure liquidity and fairness in the market. These companies can either met the percentage or value.
When a company has a high free float, massive amounts of money can flow through it without causing the stock price to jump or crash wildly.
This stability allows you to sell 20,000 shares in a single morning at a fair price because there are always enough buyers on the other side.
A stock with a Free Float Deficiency is a Liquidity Trap. Because the shares are so scarce, even a small buy order can artificially pump the price up, making the stock look like it is performing better than it actually is.
However, the danger now comes when you try to sell; without enough float in the market, there may be no buyers waiting for you, leaving your profit trapped.
As an investor, your goal is to avoid stocks, those with tiny floats that swing dangerously with every trade and look for the stocks that offer the stability and volume of a high free float.
Before committing your capital, always check the NGX X-Compliance Report on the NGX website. If a company is flagged for a free float deficiency, it is a warning and to exit strategy when you need your cash might be difficult.
There is what is called the Company's Free Float. In the Nigerian capital market, the relationship between a company's Free Float and its Liquidity is the ultimate measure of how easily an investor can enter or exit a position.
The NGX Free Float Rules serve as the regulatory framework. Free Float represents the total number of shares that are actually available for everyday people to buy and sell on the exchange.
By mandate, a company needs to meet the free float requirement. And they're classified into boards;
•Premium Board
20% of shares are issued to the public or a worth of 40 Billion
•Main Board
20% are issued to the public or a worth of 20 Billion
•Growth Board (Standard)
15% are issued to the public or a worth of 500 Million
•Growth Board (Entry)
10% are issued to the public or a worth of 50 Million
These requirements ensure liquidity and fairness in the market. These companies can either met the percentage or value.
When a company has a high free float, massive amounts of money can flow through it without causing the stock price to jump or crash wildly.
This stability allows you to sell 20,000 shares in a single morning at a fair price because there are always enough buyers on the other side.
A stock with a Free Float Deficiency is a Liquidity Trap. Because the shares are so scarce, even a small buy order can artificially pump the price up, making the stock look like it is performing better than it actually is.
However, the danger now comes when you try to sell; without enough float in the market, there may be no buyers waiting for you, leaving your profit trapped.
As an investor, your goal is to avoid stocks, those with tiny floats that swing dangerously with every trade and look for the stocks that offer the stability and volume of a high free float.
Before committing your capital, always check the NGX X-Compliance Report on the NGX website. If a company is flagged for a free float deficiency, it is a warning and to exit strategy when you need your cash might be difficult.