Shares Outstanding versus Floating Stock: An Overview
Shares outstanding and floating stock are different measures of the shares of a particular stock. To get a comprehensive overview of a company’s stock shares many investors will look at three metrics: authorized shares, outstanding shares, and floating shares.
A company’s shares outstanding is the total amount of active shares currently held by shareholders. There can be a couple of ways to identify the shares outstanding. Comprehensively, an investor might look at the shareholders’ equity of a firm’s balance sheet to find out about a company’s shares outstanding. When you look at the shareholders’ equity, most companies will provide the total authorized shares and the total outstanding shares.
Authorized shares have been approved by the company for issuance but not all have been issued. Authorized shares will also include any restricted shares that have been authorized as convertible or exercisable. Convertible or exercisable shares are only options that do not allow shares to trade actively. Shares outstanding includes only the total amount of actively trading shares currently held by shareholders. Typically, this number will be provided on the balance sheet. If it is not then it can be calculated by subtracting inactive shares and restricted shares from the authorized shares. This results in only the shares actively trading in the market. Additionally, many data providers report a company’s market capitalization daily which can be divided by its share price to identify an approximate outstanding share count.
Floating stock is generally the most narrowed metric of analyzing a company’s stock by shares. Floating stock is a measure that excludes closely held shares. Closely held shares are stock shares that are held by investors with the goal of strategic control. These types of investors can include officers, directors, company foundations, and more.
Floating stock subtracts closely held shares from the total shares outstanding to provide a narrower view of a company’s active shares.
Many indexes use the floating stock of a company as the basis for market cap calculation. These indexes are identified as free float capitalization indexes. The S&P 500 is one example. As such index providers such as S&P and others are market leaders in setting the precedent for calculating floating stock.
Outstanding Stock versus Floating Stock Example
For an example, look at the shareholders’ equity of Microsoft. The company’s balance sheet clearly displays authorized shares, outstanding shares, and floating stock shares. As of December 31, 2018, Microsoft had 24,000 authorized shares, 7,683 shares outstanding, and 7,677 floating shares. The 7,677 floating shares are the shares considered for free float market capitalization index weightings such as in the S&P 500.
To get a better understanding of how the floating shares compare to the outstanding shares many analysts take a percentage.
In the case of Microsoft, it has a relatively small float adjustment with a float percentage of 99.92%.
It can be important to consider a company’s floating stock percentage when analyzing its stock for investment. If a company’s floating stock to outstanding shares percentage is low it means that there are a lot of closely held shares and large lot trades by those investors could significantly affect the stock’s price. Heavy trading by closely held shareholders could also affect the stock’s weighting impact in free float capitalization indexes. Alternatively, if the float is close to the number of outstanding shares, it could mean that company insiders lack confidence in the stock or are not completely committed to managing the price of the company's stock.
- Floating stock subtracts closely held shares from the total shares outstanding to provide a narrower view of a company’s active shares.
- Many companies provide authorized shares, outstanding shares, and floating shares within the shareholders’ equity portion of their balance sheet.
- Floating stock shares are used in free float capitalization index calculations.
- It can be important to consider a company’s floating stock percentage when analyzing its stock for investment.