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Katherine Whitehorn

Investment Dictionary


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Free Float

 

Free float is a proportion of company’s shares that are really traded in the market. Normally, free float is lower than the total outstanding number of shares, because most of the largest shareholders do not trade their stocks

 

There might be different methodologies to calculate free float, but the principle is that shares related to management and main owners (strategic shareholders), government held shares and shares with trading restrictions shouldn’t be included in the free float.

 

The higher free float is the more liquidity can be expected in trading those shares. Some funds may have rules that allow investing in companies that have free float high enough. However, company that has very high free float may become a target of a hostile takeover.






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