Floating Stock

Loading the player...

What is a 'Floating Stock'

The number of shares available for trading of a particular stock. Floating stock is calculated by subtracting closely-held shares and restricted stock from a firm’s total outstanding shares. Closely-held shares are those owned by insiders, major shareholders and employees, while restricted stock refers to insider shares that cannot be traded because of a temporary restriction such as the lock-up period after an initial public offering. A stock with a small float will generally be more volatile than a stock with a large float, apart from having limited liquidity and wider bid-ask spread. Because of these issues, institutional investors seldom invest in low-float stocks. Also known as share float or simply “float”.

BREAKING DOWN 'Floating Stock'

A company may have a large number of shares outstanding, but a fairly limited float. For example, let’s say ABC Co. has 50 million shares outstanding, with major stakeholders as follows – Institutions 25 million, XYZ Company 10 million, Management and Insiders 5 million, Employee Stock Ownership Plan (ESOP) 2 million. Floating stock is therefore only 8 million shares (i.e. 50 million – 42 million), or 16% of outstanding shares.

Low float is typically an impediment to active trading. This lack of trading activity makes it difficult to exit long positions in stocks that have limited float.

The amount of a company’s floating stock will typically go up over time. This occurs because companies may sell shares in a secondary offering to expand the business or make an acquisition, or periodically when employees exercise their stock options.

Other corporate actions can also have a significant impact on floating shares. A share buyback, for example, decreases the number of outstanding shares, so floating shares as a percentage of outstanding stock will go down. Similarly, while a share split will increase floating shares, which may provide a temporary boost to the stock, a reverse split decreases float and makes it harder to borrow, which is a deterrent to short-sellers.

RELATED TERMS
  1. Float

    Money in the banking system that is briefly counted twice due ...
  2. Floating Rate Fund

    A mutual fund that invests in financial instruments with a variable ...
  3. Dirty Float

    A system of floating exchange rates in which the government or ...
  4. Clean Float

    Also known as a pure exchange rate, a clean float occurs when ...
  5. Average Daily Float

    1. The dollar amount of checks or other negotiable instruments ...
  6. Float Time

    The amount of time between when an individual writes and submits ...
Related Articles
  1. Stock Analysis

    Institutional and Inside Buyers Are Buying Stocks Under $5

    Buyers are snatching up these stocks. Could this mean something?
  2. Stock Analysis

    Floating Rate Loans Look Attractive

    The search for income continues to remain a major priority for investors, as interest rates still sit at historically low levels. In order to get yield, many have moved up the maturity ladder.
  3. Stock Analysis

    Rally Running Out of Steam? Why No News Is Good News

    US stocks rose higher for a fourth day as borrowing costs at debt auctions in Europe dropped. In fact, the news overshadowed some very disappointing US data, including low retail sales in December ...
  4. Stock Analysis

    Smart Money Buying Up Stocks

    If you prefer stocks trading at low prices, keep in mind that there's the possibility they've been trading lower for a reason.
  5. Investing Basics

    What are Issued Shares?

    Issued shares are the amount of authorized stocks a company’s shareholders buy and own. The annual report shows the number of outstanding shares.
  6. Mutual Funds & ETFs

    FREEX: Franklin Real Estate Fund Top 5 Holdings Analysis

    Discover the top five holdings of the Franklin Real Estate Securities A Fund, and get an overview of each company's business and financial information.
  7. Stock Analysis

    Is it Time to Buy Floating Rate Bonds?

    The Fed’s awaited interest rate hike could finally be at hand. Are floating rate bonds the way to go?
  8. Stock Analysis

    Should Dividend Investors Be Afraid Of Obama's Budget Plans?

    President Obama's proposed 2013 budget raises some concerns for investors.
  9. Investing Basics

    Float

    Float is money in the banking system that is briefly counted twice due to delays in processing checks.
  10. Bonds & Fixed Income

    What Are Corporate Actions?

    Be a savvy investor - learn how corporate actions affect you as a shareholder.
RELATED FAQS
  1. What is the difference between shares outstanding and floating stock?

    Learn about shares outstanding, floating stock, how to calculate a company's floating stock and the difference between shares ... Read Answer >>
  2. How do corporate actions affect floating stock?

    Learn what floating stock is, and find out about some of the actions a company may take to affect the amount of the company's ... Read Answer >>
  3. What is a treasury stock?

    Every company has an authorized amount of stock it can issue legally. Of this amount, the total number of shares owned by ... Read Answer >>
  4. What months of the year typically have the highest float?

    Learn more about how float occurs within the United States and how it is monitored. Find out why float frequently happens ... Read Answer >>
  5. What percentage of a company's float can be shorted?

    The quick answer is that the amount of shares shorted can actually exceed 50% of the float in a company. The percentage of ... Read Answer >>
  6. How does float affect the nation's money supply?

    Learn how float affects the appearance of the nation's money supply, and receive a brief lesson on how the U.S. government ... Read Answer >>
Hot Definitions
  1. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  2. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  4. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  5. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  6. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
Trading Center