Definitions

Float_(finance)

Float (finance)

The free float of a public company is an estimate of the proportion of shares that are not held by large owners and that are not stock with sales restrictions (restricted stock that cannot be sold until they become unrestricted stock).

The free float or a public float is usually defined as being all shares held by investors other than:

  • shares held by owners owning more than 5% of all shares (those could be institutional investors, "strategic shareholders," founders, executives, and other insiders' holdings)
  • restricted stocks (granted to executives that can be, but don't have to be, registered insiders)
  • insider holdings (it is assumed that insiders hold stock for the very long term)

The free float is an important criterion in quoting a share on the stock market.

To float a company means to list its shares on a public stock exchange through an initial public offering (or "flotation").

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