Free Float
IntermediateFree float is the number of a company's shares that are available for the public to trade, excluding shares held by insiders, governments, controlling shareholders or others unlikely to sell.
Not all of a company's shares change hands freely. Founders, family owners, other companies, governments or strategic investors may hold large stakes for the long term. These shares are excluded from the free float.
For example, a company with 100 million shares might have 30 million held by its founders and 10 million by a government. Its free float is 60 million shares, or 60%.
Free float matters for several reasons. Companies with a small free float can have less liquid shares, meaning trading is thinner and prices can move sharply on relatively small orders. Many major stock indices adjust company weightings for free float, so a company's influence on the index depends on the shares actually available to investors rather than its total market capitalization.
Stock exchanges sometimes require a minimum free float for a company to list or remain listed, to ensure there is a genuine public market for its shares.
For worked examples and full lessons, visit notesbysara.org.