![]() Company is a recent IPO: When a company issues stock to the public for the first time, generally, a large portion of its existing shareholder base is restricted for selling for a certain period of time following the IPO.It's much harder for short-term traders to manipulate or otherwise disrupt the share price of a high float company as opposed to one with a small float. On the other hand, a high stock float can be beneficial in that it provides more liquidity and tends to lead to lower volatility of a share price. Some investors prefer to invest in companies where the founder or a family control the firm. Oftentimes, in fact, it's a sign of alignment between insiders and their public shareholders. Is it bad for a company to have a low float? Not necessarily. As a general tendency, the longer a company has been publicly-traded, the more freely its stock will float.Ī low float stock, by contrast, has insiders which control a bunch of the total outstanding stock. 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. Restricted shares granted to employees as part of their compensation package but which have not yet vestedĪ high float stock is one where the vast majority of a company's total outstanding shares are freely-traded.Shares that are still under restriction and cannot yet be sold, for example, restricted shares following a recent IPO.Shares owned by a charitable foundation or trust affiliated with the company.Typically, the following categories of shares are not counted in a stock's float: What Is Not Included in the Float of a Stock? This is a different meaning than the more common one detailed in this article. Note: Sometimes investors refer to issuing new stock to the public, such as through as an initial public offering, as floating a stock. A percentage: shows the amount of stock float in proportion to the total number of shares outstanding in a particular company.An absolute figure: simply the total number of freely-trading shares.There are two common ways to look at stock float. However, if insiders own a large portion of those outstanding shares, the true stock float will be far smaller. Often, people look at market capitalization first, as that gives the overall value of a company including all of its outstanding shares. Stock float is an important metric because it gives investors a sense of the liquidity of a company's stock. It also excludes shares which are under trading restriction and not currently eligible for sale. Stock float excludes shares that are held by executives, directors, and other insiders of a company. Stock float, or as it's also known, floating stock, is the amount of shares of a company that are freely-trading on the secondary market. SARINYAPINNGAM/iStock via Getty Images What Is Stock Float?
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