Central Bank of Russia considering differentiating free float requirements depending on company size

MOSCOW. May 19 (Interfax) - The Central Bank of Russia is discussing the differentiation of free float requirements for issuers seeking to include their shares in the first quotation tier based on company size, CBR Corporate Relations Department Director Ekaterina Abasheva said.

"We believe it is necessary to carefully consider the need to differentiate free float depending on the size of the company. This is the direction we are currently exploring - lowering it [the threshold] for large companies while maintaining or increasing it for smaller ones," Abasheva told reporters on the sidelines of the National Association of Stock Market Participants (NAUFOR) conference titled "The Russian Stock Market 2025".

Currently, the following requirement applies for shares aiming to be included in the first quotation tier - if the capitalization exceeds 60 billion rubles, the free float must be 10% or more.

Lowering the free float requirement below 10% could help revive the primary placement market, Elena Kuritsyna, the managing director for issuer and government relations at the Moscow Exchange, said during her speech at the conference.

"It's hard to find someone in this room more interested in a large chunk of shares being placed during an IPO. And of course, the 10% requirement for the first quotation tier is not just about ensuring sufficient depth and capacity of the order book and liquidity. It's also - and this concerns me greatly - about ensuring that investors have enough clout, a sufficient stake to potentially consolidate, aggregate, and with the help of independent directors, join the board and have a hand in governance, in participating in management. Because, in theory, a high free float percentage should serve two purposes - on the one hand, ensuring deep liquidity, and on the other, emphasizing that market investors have at least some influence and the ability to engage in corporate governance and communicate with the company and its management, saying, 'I've invested more than just a few pennies - I own at least 10%,'" Kuritsyna said.

"But I agree that sometimes you need to take a step back to later take two steps forward. I think a temporary or phased easing of the free float requirement for the first quotation tier - for companies that, objectively due to their size and valuation, cannot currently meet the 10% threshold, while listing in the second quotation tier does not align with their self-perception, reputation, or business scale - would be the right move," she said.

Such a decision, combined with other factors (changes in monetary policy and macroeconomic stability) "could play a very positive role in restarting our primary market," she said.

Abasheva in turn said that the CBR definitely sees room to lower free float requirements, but with a simultaneous increase in requirements regarding issuer value.

"We are certainly considering the possibility of lowering the threshold below 10%, but only for large companies," she said.