The ISE’s approach has been to ensure full consistency with international norms. Accordingly its interpretation of free-float uses the standard definition of leading index providers. It is interpreted as follows:
In the calculation of free-float, two types of shareholding are excluded; firstly shares held by interested parties and secondly long term, strategic shareholdings of a significant portion of the issued shares.
- Management and Board members: Shares owned by a company’s management or Board of Directors are not included in free-float. Similarly, shares owned by persons related to or affiliated with the company’s management or Board of Directors are not included in free-float.
- Corporations: Shares held by a company itself as treasury shares (or in some equivalent form) are not included in free-float. Note that, as the ISE does not currently include treasury shares in total market capitalization of the company, treasury shares are excluded from the base upon which the free-float is calculated. Please refer to the example below for further guidance.
- Employee Share Ownership Plans (ESOPs): Shares held by a ESOT, even if not allocated to underlying beneficiaries, are not included in free-float.
Private or public shareholdings with investment objectives that indicate those holdings are not likely to be available to be traded in the market due to their long term investment horizon.
- Individuals: Free-float generally includes shares owned by individuals not included in the definition of Management and Board Members above. However, significant shareholdings held by individuals that are strategic in nature should not be included in free-float. There is a rebuttable presumption that any holding of 5% or more in the capital of an issuer held by any individual and corporation, other than an institution acting for its clients, be considered a long term strategic holding.
- Governments: Shares owned by governments and affiliated entities where the investment objective indicates that it is strategic should not be included in free-float (e.g. the Government’s 20% holding in Aer Lingus Plc).
- Government agencies and government-related investment funds: The investment objective of the agency / fund will determine whether the shareholding is strategic and therefore not included in free-float.
- Investment funds, mutual funds or unit trusts: Shares owned in investment funds, mutual funds and unit-trusts are included in free-float.
- Pension funds: Generally, shares held by pension funds (including shares of a company for whose employees the fund has been established) are included in free-float unless there is a strong indication that the holding is strategic.
- Venture capital funds: Shareholdings are included in free-float unless the investment is strategic in nature.
- Banks / Lenders:Shareholdings by such entities are included in free-float if the investment is non-strategic in nature.
- Nominees or trustees: Nominee or trustee registered shareholdings are classified as strategic or non-strategic based on an analysis of the beneficial owner of the shares.
- Insurance companies: Shareholdings are included in free-float unless the investment is strategic in nature.
- Lock-up periods: Shareholdings that are subject to lock-up periods are not considered to be free-float during the lock-up period. When the lock-up period expires, the shares are classified as free-float or non free-float based on the nature of the shareholder and is subject to standard free-float rules.
- Others:Inclusion in free-float should be based on analysis of the strategic or non-strategic nature of the holding.