Indonesia free float rules jeopardised by regulatory gap

Author: Ashley Lee | Published: 19 Mar 2014
  • The Indonesia Stock Exchange announced higher free float requirements for new IPOs and listed companies; 
  • The most severe consequence for non-compliance is forced delisting;
  • But Indonesia lacks the regulatory framework for forced delistings, with even take-privates or public takeovers difficult to complete

Indonesia’s new free float requirement is intended to boost market liquidity, but regulators may be unable to enforce penalties against non-complying listed companies.

In January the Indonesia Stock Exchange (IDX) announced a higher free float requirement. Listed companies must float 7.5% by January 30 2016 and have more than 300 shareholders, while the free float of newly listed companies will be determined by IPO value.

Non-compliant companies will face penalties such as forced delisting. But Indonesia’s regulatory...