Key Takeaways
- The float is calculated by taking a company's outstanding shares and subtracting any restricted stock.
- It’s an indication of how many shares are actually available to be bought and sold by the general investing public.
- There is an inverse correlation between the size of a company's float and the volatility of the stock's price.
How do you calculate public float?
Public Float = sale price of common stock on the applicable date (e.g., last business day of the issuer’s second fiscal quarter (June 30th)) X the number of aggregate worldwide outstanding shares held by non-affiliates of the issuer on that date. What Are Non-Affiliate Shares?
What is the difference between public and stock float?
The public float is traded by institutions and retail traders like you and me. Stock float is the number of shares left for everyday traders like you and me and investors in the public market. It’s our piece of the company’s pie.
How do you find a company's float?
Finding a company's float can also be as easy as looking at its "Key Statistics" page on Yahoo! Finance, or some other research site. Stock prices work on the principle of supply and demand. If there are less shares and more buyers, the shares become more valuable.
How do float stocks work?
An Example of How a Float Works. This makes sense when you think about it: the greater the number of shares available for trade, the less volatility the stock will show because the harder it will be for a smaller number of shares to move the price.
How do you determine public float?
Public float is calculated by multiplying the number of the company's common shares held by non-affiliates by the market price and, in the case of an IPO, adding to that number the product obtained by multiplying the common shares covered by the registration statement by their estimated public offering price.
What is public float in stock?
A stock float is the total number of shares that are available for public investors to buy and sell. It may be expressed as an absolute figure such as 10 million shares, or it may sometimes be expressed as a percentage of the company's total outstanding shares.
What is a good float for a stock?
What is a good float for a stock? Investors view anything above 20 million shares as a “good float” for a company. With volumes like this, trading can remain high, and the market can avoid illiquidity, which increases volatility and the bid-ask spread.
Where can I find float of a stock?
Outstanding shares are shares that are not reserved or claimed. Float refers to the shares that are available. One way to find float is to take the total number of shares and subtract the number shares that are already owned by insiders. Many tools will provide the float data for you.
How do you increase public float?
For example, a company can increase its free float by selling shares in a secondary offering or conducting a stock split. Additionally, as restricted shares become unrestricted, the unrestricted shares increase the free float.
Is public float the same as market cap?
Market cap vs. Market cap is based on the total value of all a company's shares of stock. Float is the number of outstanding shares for trading by the general public. The free-float method of calculating market cap excludes locked-in shares, such as those held by company executives and governments.
What is considered a high float stock?
A high float stock is one where the vast majority of a company's total outstanding shares are freely-traded. Examples of this would be many S&P 500 companies where ownership of its shares is highly dispersed and insiders tend to hold small positions in the firm.
What is a high percent of float?
Short percentage of float is the percentage of shares that short-sellers have borrowed from the float. What is considered a high short percentage of float is subjective; there is no hard and fast rule. However, a short interest as a percentage of float above 20% is generally considered very high.
What is considered a low float stock?
Low float stocks have a small number of shares available for trading. Investors typically consider a float of 10-20 million shares as a low float, but there are companies with floats below one million.
What is the difference between shares outstanding and public float?
Shares outstanding refers to the total number of shares a company has issued, while the public float — also referred to as floating shares or "the float" — are shares that are publicly owned, unrestricted and available on the open market.
What's an example of float?
The definition of a float is a small buoyant object, or a small object attached to a fishing line to show you when a fish bites. A raft that stays on the surface of the pool is an example of a float. A little round object attached to your fishing pole that shows you when a fish has bitten is an example of a float.
Can float be higher than shares outstanding?
No, float—short for floating stock or floating shares—can't be higher than shares outstanding. It's always a smaller figure because it only counts the number of shares available for investment and trading on financial exchanges.
What is float in stock market?
The float is the number of available shares in the public market . Remove restricted shares from the equation and you end up with the stock float. Who’s in control of the shares can ebb and flow over time. Sometimes it’s the insiders, and sometimes it’s the institutional investors or retail traders.
Why do stocks float?
Stock float allows companies to raise cash for things that enhance their value. These things include capital expenditures, infrastructure, and other strategic investments.
Why are small caps called low float stocks?
The smaller the cap, the greater the volatility. Small caps are also called low float stocks because their stock float has fewer shares to go around. These are the volatile stocks that most of my students play in the SteadyTrade Team.
How does insider ownership affect stock price?
For example, if insiders own 25% of the float shares, it’ll affect the stock price when they sell. If they own 50% of the stock float, the impact will be even greater. There are many ways a company can influence its share price. It can issue more shares than are already in the market, causing share dilution.
How do you influence the price of an inventory?
The way you can influence the price of that inventory is by buying or selling float shares in the public market. If there aren’t enough buyers, the price of the stock float goes “on sale.”. Sometimes a whole sector will go on sale.
How does keeping an eye on a stock float help?
Keeping an eye on the stock float can help you predict a stock’’s direction. When you know how much of the stock float insiders have, you can keep an eye on events that could affect the share price. For example, if insiders own 25% of the float shares, it’ll affect the stock price when they sell.
What happens when you reverse a stock split?
In a reverse stock split, float shares might go from five to one, making the stock price higher and less available. For example, if a stock cost $20 before the reverse split and you owned five shares, you’d now own one share valued at $100. The value stays the same — in theory.
What is public float?
Your public float is the aggregate number of your company’s outstanding shares available for trading by public investors, multiplied by the current sale price of the shares. It does not include: 1 Shares held by executive officers, directors and other stockholders who are deemed affiliates of the company (including all restricted stock and performance shares issued under equity compensation plans) 2 Treasury Shares 3 Derivative Securities (e.g., options, warrants and restricted stock units)
What does the dollar value of a float mean?
The dollar value of your public float determines your filer status which establishes the deadline by which your company must file its annual and quarterly reports with the SEC. Your public float can also impact your eligibility to register shares on a short-form registration statement, which can make raising capital more difficult.
Why is a stockholder considered a controlling person?
A stockholder might be viewed as a controlling person because of the stockholder’s close personal or business relationship with the management of the issuer. Thus, an inquiry into this type of relationship becomes important in attempting to determine whether the stockholder should be deemed an affiliate.
What does it mean when your second quarter is coming to an end?
public company, your second fiscal quarter has recently come to an end, which means that it’s time to calculate your public float to see if your reporting status has changed. Here are a few things to remember.
Why is the S factor important in IBD?
Because supply and demand are so important, IBD has incorporated them into its investing strategy. When you see the S in CAN SLIM, you should think: supply and demand. And you should include the S-factor as you evaluate stocks. Check out their float, which is the number of shares publicly available for trading.
Is it harder to make a big move with a massive float?
After all, it's simply harder for a stock with a massive float to make a big move. If you can find a company that's otherwise the same but has a smaller supply of shares, that's the one that is more likely to show dramatic action. Of course, that action could be to the downside or the upside, so you don't want to go too far.
Do stocks with huge floats have any advantages?
They can serve as nice defensive plays in volatile times, since they're relatively slow-moving. They probably won't score huge gains, but also could move downward in a more muted fashion.
What is float in capital markets?
The term float refers to the regular shares a company has issued to the public that are available for investors to trade.
What is float stock 2021?
Updated Jun 23, 2021. The term float refers to the regular shares a company has issued to the public that are available for investors to trade. This figure is derived by taking a company's outstanding shares and subtracting any restricted stock, which is stock that is under some sort of sales restriction. Restricted stock can include stock held by ...
Why is restricted stock important?
A company's float is an important number for investors because it indicates how many shares are actually available to be bought and sold by the general investing public.
Why is volatility less in stocks?
This makes sense when you think about it, as the greater the number of shares available for trade, the less volatility the stock will experience because the harder it will be for a smaller number of shares to move the price.
Is a company responsible for how shares within the float are traded by the public?
The company is not responsible for how shares within the float are traded by the public; this is a function of the secondary market. Only changes that affect the number of shares available for trade change the float, not secondary market transactions, nor the creation or trading of stock options.
Do you have to issue all of your authorized shares?
It’s not required that the company issue all of its authorized shares, however. Outstanding shares are the number of shares a company has issued. These are all the shares that can be bought and sold, including restricted shares. The number of outstanding and floating shares can vary.
Is restricted stock a form of employee compensation?
Thus, there can be a large difference between outstanding and authorized shares or floating and authorized shares. Restricted stock is gaining popularity as a form of employee compensation given its ease and straightforwardness compared to stock options.
How to determine float
The simple way to calculate float is to take the total number of shares outstanding and subtract the number held by officers and directors. Officers and directors cannot trade their shares as easily as a regular investor. So, float assumes that these insiders have their shares tucked away in a safe deposit box.
What float means
Stock prices work on the principle of supply and demand. If there are less shares and more buyers, the shares become more valuable. If there are more shares and less buyers, the shares become less valuable. So, the fewer shares available to the public, the higher the demand when buyers are introduced.
What to take away
That last discussion of private placements may have confused you... Hopefully it didn't.
About the Author: Thomas Rice
Thomas has been the publisher and editor of The Bowser Report since January 2013. From January 2012 to January 2013, he was a co-editor at The Bowser Report, and before that (October 2010 to January 2012), he was a research analyst with the company. Thomas gained unique experience working under R. Max Bowser, the newsletter's founder.
How can a company decrease its free float?
Conversely, a company can decrease its free float by doing share buybacks. Share Repurchase A share repurchase refers to when the management of a public company decides to buy back company shares that were previously sold to the public.
What is free float?
Free float, also known as public float, refers to the shares of a company that can be publicly traded and are not restricted (i.e., held by insiders. Insider Information Insider information, also called inside information, refers to non-public facts regarding a publicly traded company that can provide a financial advantage in the markets.
Why is free float important?
Generally, stocks with a small free float are seldom invested in by institutional investors. This is because such stocks are typically more volatile than a stock with a large float.
How many shares does Company A have?
Company A is a publicly traded company with 1,000,000 shares authorized. Currently, as indicated on the company’s balance sheet, its total outstanding common shares number 500,000 (50,000 of which are held by the CEO and CFO of the company) while 80,000 shares are held in treasury. Determine the free float of Company A.
What is restricted stock?
Restricted Stock Restricted stock refers to an award of stock to a person that is subject to conditions that must be met before the stockholder can exercise the right to transfer or sell the stock.
What is short interest?
Short Interest Short interest refers to the number of shares sold short but not yet repurchased or covered. The short interest of a company can be indicated as an absolute number or as a percentage of shares outstanding. It is looked at by investors to help determine the prevailing market sentiment.
What is common stock?
Common Stock Common stock is a type of security that represents ownership of equity in a company. There are other terms – such as common share, ordinary share, or voting share – that are equivalent to common stock.
