Tehran Stocks’ Average Free Float at 20 Percent
EghtesadOnline: Companies listed on Tehran's equity market had an average free float of slightly over 20% in the last fiscal year (March 2017-18), according to the latest market data released by Securities and Exchange Organization.
Floating stock is the number of shares available for trading. It is calculated by subtracting closely-held shares and restricted stocks from a firm’s total outstanding shares.
Closely-held shares are those owned by insiders, major shareholders and employees, while restricted stocks refer to insider shares that cannot be traded because of a temporary restriction such as the lockup period after an initial public offering.
A stock with a small float is generally of less interest to the average investor. It takes fewer trades to move the share price, hence its high volatility and limited liquidity. And there's also the wide bid-ask spread for each, Financial Tribune reported.
Low float is typically an impediment to active trading, as the limited trading activity makes it difficult to exit long positions in stocks with small float.
This is while the average free float for the world's top markets usually hovers around 80%, according to the Persian economic daily Donya-e-Eqtesad.
> New Arrivals Barely Make a Change
SEO's report analyzed 326 companies listed on Tehran Stock Exchange and 97 on the smaller Iran Fara Bourse, some of which were newcomers listed in the last fiscal.
Last year's initial public offerings on TSE included Behpardakht Mellat with a 6.35% float, Chodan Sazan Company with 24.31%, HiWeb with 6.4%, South Kaveh Kish Steel Company with 5.32%, Omid Investment Bank with 3.58%, Behshahr Industry Detergent Management Company with 12.09% and Shafadarou Company with 0.59%.
While highly anticipated, the IPOs barely boosted the average market float, partly due to the fact that most of their buyers were large-cap institutional investors.
Further pressuring the average float was the long-term freezing of shares such as the controversial Electricity Meter Manufacturing Company (better known by its Persian name Sherkat Kontorsazi Iran) and Bank Pasargad on TSE, and Iran Zamin Bank, Tourism Bank and Bank Day at IFB.
> Highest and Lowest TSE Float
The data indicate that Middle East Bank had the highest float for the year with 91.95% of its shares up for trading. It was followed by Azar Refractories Company with 70.45% and Silica Sand Company with 66.93%.
TSE's top echelon was not very crowded, as only 15 other stock tickers had a float higher than 50%.
Most other companies reaching up to 114 were crammed into the 20-40% territory with large names such as National Iranian Copper Industries Company, Khouzestan Steel Company and Bank Mellat among them.
Furthermore, 84 companies had a floating share of less than 10% and 22, while others were below 1%.
> Highest and Lowest IFB Float
Yazd Alloy Steel Industries Company was at the top with 99.99% floating share, basically the highest between both exchanges. YASICO's investors, in fact, are mostly non-institutional, with Novin Insurance being the only institutional one as it holds a 1.99% stake.
Sabzevar Cement Company comes next with 93.24%. Similar to YASICO, 86.48% of the cement company's stocks are owned by non-institutional investors.
The third place goes to Kerman Development and Investment Company with 74.59%.
Sans the above three, only two companies have a floating share higher than 60%, namely Shomalshargh Shahrood Industrial and Mining Company and Tadbirgaran Fars and Khuzestan Investment Company.
Going down, there are no companies in the 50-60% range, while 15 are between 30-50%. A total of 18 are between 20-30% and 30 have a float higher than 10%.
And at the bottom of the chart, 25 companies' free float is less than 10% and four have it under 1%.