Let's learn public shareholding

 

Minority Shareholders

• Typically, Minority interest is considered as the ownership position wherein such shareholders do not form part of the majority shareholding of the company. The opposite of a minority shareholder is the majority shareholder/s holding the majority of the ownership in the company.

  For Ex: directors of the company, parent company, subsidiary company, CEO, close family members, Key Management Personals, etc. are considered nonpublic and categories of shareholders other than non-public are considered as public (Ref note 1 for full detailed definition)

 Public shareholders

• CSE listing rules have defined public shareholder by identifying who is not considered as public (Ref: CSE listing Rules Definition).

  Retail investors

• Many sources also refer to “retail” investors. Retail investors are typically non-professional market participants who generally invest smaller amounts than larger investors, institutional investors and qualified investors. Many IPO prospectus in CSE indicates a value threshold for retail investors.

• Even though the CSE listing rules do not provide a value threshold for public shareholders, some references are there in the listing rules to identify a “qualified” investor.

  For Ex: Individual investors are who subscribe for Shares up to a value of Sri Lanka Rupees One Hundred Thousand (LKR 100,000/-) (i.e., up to 100,000 Shares) are considered as retail. (Source: UB Finance prospectus)

 For Ex: LKR 5 Mn threshold for qualified investors to invest in BASEL investments (listing rule 2.2.1 L, Where BASEL 3 debentures are limited to qualified investors.)

  

Importance of public shareholders in a listed company

When a privately held company is listed, it is expected and required by rules to have a minimum number and percentage of non-related/ non-controlling public shareholders. For Ex: main board companies listed in the CSE are required at the time of listing to have a minimum of 20% of shares and a minimum of 500 number of public shareholders, when the float adjusted market capitalization of the company is less than 2.5 Bn.