Starting out
Free float
The portion of a company’s shares that is actually available to trade in the market.
How it works
Shares held by founders, governments, or long-term strategic owners are excluded, because they are not realistically for sale. The free float is what is left, and it is what determines how liquid the shares are in practice.
Most major indices weight companies by free-float market cap rather than total market cap, so that the index only claims to hold shares an investor could actually buy.
Where it misleads people
A small free float makes a share far more volatile than its headline market cap suggests. Modest buying pressure has to be absorbed by a small pool of available shares, and the price moves accordingly.
Related terms
- Market capitalisationWhat the market says a whole company is worth: the share price multiplied by the number of shares.
- LiquidityHow quickly you can turn something into cash at a fair price, without moving the price against yourself.
- IndexA rules-based list of securities used to represent a market or segment of one.
- Lock-up periodA window after an IPO during which insiders are barred from selling their shares.
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Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.