Free Float Calculator
The free float of a company represents the number of shares available for public trading, which excludes restricted shares held by insiders or institutional investors. This metric is essential for investors, as it helps assess the stock’s availability in the open market, thus affecting liquidity, volatility, and the potential impact on the stock’s price.
Formula
The formula for calculating free float (FF) is:
FF = EF − ES
where:
- FF = Free Float
- EF = Outstanding Shares
- ES = Restricted Shares
How to Use
- Enter the total outstanding shares of the company (EF).
- Input the restricted shares (ES) that are not available for public trading.
- Click “Calculate” to find the free float value, which represents the shares available for trading in the open market.
Example
If a company has 1,000,000 outstanding shares and 200,000 restricted shares, the free float would be 800,000 shares, calculated as follows:
Free Float = 1,000,000 – 200,000 = 800,000.
FAQs
- What is free float?
Free float refers to the number of shares available for public trading in the stock market. - Why is free float important for investors?
It impacts a stock’s liquidity and volatility, influencing its price stability in the market. - What are restricted shares?
Restricted shares are shares that are not available for public trading, often held by insiders or institutional investors. - How does free float affect stock liquidity?
Higher free float usually means higher liquidity, making the stock easier to buy or sell without significantly impacting the price. - Is a higher free float always better?
It can be advantageous for liquidity, but too high a float may dilute demand and impact stock price movement. - How do free float and outstanding shares differ?
Outstanding shares include all shares, while free float excludes restricted shares, only reflecting those available for trading. - Can free float change over time?
Yes, as insiders or institutions sell restricted shares, the free float can increase. - What is a low free float stock?
A stock with a low free float has a smaller percentage of shares available for trading, often leading to higher volatility. - How do I find the outstanding and restricted shares for a company?
These figures are often available in the company’s annual report or from stock exchange data. - Does free float affect stock volatility?
Yes, lower free float stocks are generally more volatile due to limited supply and high demand. - Can a company increase its free float?
Yes, by releasing restricted shares into the market or through stock splits. - What is a typical free float percentage?
It varies by company and industry, but many companies aim for 50-80% free float. - Are free float stocks easier to trade?
Generally, yes, due to higher liquidity, but this also depends on market demand. - What does low free float mean for small-cap stocks?
Small-cap stocks with low free float may see significant price swings due to limited shares in circulation. - What is a float-adjusted market cap?
It’s the market capitalization calculated only using the free float shares, giving a more accurate measure of market value. - How does free float impact stock indices?
Some indices use float-adjusted market caps to better represent the stocks actively traded. - Are all restricted shares released at once?
No, restricted shares are often released gradually to avoid flooding the market. - Do stock splits affect free float?
Stock splits increase the number of shares but typically do not impact free float unless restrictions change. - Is a low free float stock riskier?
Low free float stocks are often more volatile and can be riskier for short-term investors. - Can free float be zero?
Theoretically, yes, if all shares are restricted, but in practice, most public companies have some free float.
Conclusion
The free float calculator provides a quick and accurate way to assess a company’s free float, which is vital in understanding a stock’s liquidity, volatility, and tradeability. Knowing the free float can help investors make informed decisions, especially in markets with fluctuating supply and demand.