freefloat

Free float is a measure used in finance to describe the portion of a company’s outstanding shares that are readily available for trading by public investors. It excludes shares held by insiders, management, government, strategic investors, and any treasury shares that are not freely tradable.

Calculation and definitions can vary by jurisdiction and data provider. In general, free float equals total shares outstanding minus restricted shares and other shares that are not readily tradable. Treasury shares are typically excluded from the free float. Some definitions also exclude shares held by large strategic owners or certain employee stock plans until they become tradable. Because of these variations, free float is sometimes reported as both a count of shares and as a percentage of total outstanding shares.

Significance and use. Free float influences a stock’s liquidity and trading activity; a higher free float usually correlates with tighter bid-ask spreads and larger trading volumes. It also affects the weighting of a stock in certain market indices that use free float-based adjustments to determine component weights. Exchange listing rules may include minimum free float requirements to ensure public liquidity.

Free float is distinct from total shares outstanding. The latter includes all issued shares, including those held by insiders and strategic holders, as well as treasury shares. Free float market capitalization is the product of the free float share count and the current share price, and is often used as a liquidity-oriented valuation metric.

Example. If a company has 100 million shares outstanding, with 20 million restricted shares and 10 million treasury shares, its free float would be 70 million shares (70% of the total).