The Securities and Exchange Commission (SEC) has ordered all companies planning to conduct an initial public offering (IPO) to make way for a minimum public float of 20 percent.
This move would boost liquidity, improve price discovery and lessen opportunities for price manipulation, the SEC said Tuesday.
A public float refers to the portion of the issued and outstanding shares of a company that are freely available and tradable in the market. These shares are
nonstrategic in nature and thus not meant for gaining substantial influence on how the company is managed.
Significant shareholdings of 10 percent or more of the total issued and outstanding shares of the company are considered strategic and thus excluded in the public float.
All public companies must also maintain a minimum public ownership (MPO) of at least 20 percent.