Shares Outstanding vs. Floating Stock: An Overview
Shares outstanding and floating stock are different measures of the number of shares of a particular company's stock. They are two of three share-number metrics that investors often look at to get a comprehensive overview of a company’s stock shares: authorized shares, outstanding shares, and floating shares.
Authorized shares refer to the maximum number of shares that a corporation is legally permitted to issue; it includes already-issued stock, along with shares that have the management's approval but have not, yet, been released onto the trading market—including stock options. Outstanding shares include those held by shareholders and company insiders. Floating shares indicate the number of shares actually available for trading.
- Many companies provide authorized shares and outstanding share information on the financial disclosures.
- Shares outstanding is the total number of shares issued and actively held by stockholders.
- Floating stock is the result of subtracting closely-held shares from the total shares outstanding to provide a narrower view of a company’s active shares.
- 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.
A company’s shares outstanding (or outstanding shares) are the total number of shares issued and actively held by stockholders—both outside investors and corporate insiders. However, they must be actual shares.
A company may provide executives with stock options that can be converted to shares. But such stock benefits, as they're called, are not included in the tally of shares outstanding until shares have been fully issued. (Stock benefits like stock options do count in the authorized share bucket—that is, the number of authorized shares a company has.)
Shares outstanding and floating shares typically refer to all classes of a company's common stock, as opposed to preferred stock.
There can be a couple of ways to identify the shares outstanding. Comprehensively, an investor might look at the "shareholders’ equity" figure on the firm’s balance sheet to identify a company’s shares outstanding. Shareholders’ equity will typically provide the number of total authorized shares and the total outstanding shares.
Additionally, many stock listings and equity data providers daily report a company’s current market capitalization or market cap. This figure can be divided by its share price to identify an outstanding share count.
Floating stock is the most narrow number of a company's shares. This measure excludes closely-held shares that are held by company insiders or controlling investors. These stockholders typically include officers, directors, and company-sponsored foundations.
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 of a free-float index. As such, index providers such as S&P and others are market leaders in setting a precedent for calculating floating stock methodologies.
It can be useful to compare a company’s floating stock (or "float" for short) to its shares outstanding when analyzing it for investment—a figure known as the floating stock percentage.
If a company’s floating stock to outstanding shares percentage is low, it means that the company has a lot of closely-held shares. Large lot trades by those investors could significantly affect the stock’s price and the stock’s volatility. Heavy trading by closely-held shareholders could also affect the stock’s weighting impact in free float capitalization indexes.
Alternatively, if the float is high to the number of outstanding shares, it means a large number of shares are unrestricted and available for trading—the stock is a very liquid one, in other words.
Many investors prize a high float stock: Its share price will be low in volatility, with a low bid-ask spread. If the float suddenly shoots up, though, it could mean that company insiders or institutional investors lack confidence in the stock or are not completely committed to managing its price.
A company's float is an important number for investors because it indicates how many shares are actually available to be bought and sold by the general investing public.
Shares Outstanding vs. Floating Stock Example
For example, consider shareholders’ equity of XYZ, Corp. The company’s financials report authorized shares, outstanding shares, and floating stock shares:
- 24 billion authorized shares
- 7.50 billion shares outstanding
- 7.00 billion floating shares
The 7.00 billion floating shares are the shares considered for the free float, market capitalization index weightings. In the case of XYZ, it has a relatively small float adjustment. That means it's a high float stock: The vast majority of its shares are available to the general investing public.
Is Shares Outstanding the Same As Float?
No, though the two both relate to the number of shares a public company has issued.
- Shares outstanding refer to a company's stock currently held by all its shareholders, including share blocks held by institutional investors and restricted shares owned by the company’s officers and insiders.
- Floating stock, aka float, refers to the number of shares a company actually has available to trade in the open market.
What Is a Stock's Float?
Float refers to the number of issued shares available for trading of a particular stock—that is, they are available to be bought and sold on financial exchanges and stock markets. It excludes closely-held or insider shares: those owned by corporate management and employees, certain large or institutional investors who have controlling stakes or seats on the board of directors, or company-owned foundations.
Are More Shares Outstanding Good or Bad?
Shares outstanding is just the amount of all the company's stock that's in the hands of its stockholders. By itself, it is not intrinsically good or bad.
However, what is significant is the number of shares outstanding. Shares outstanding are useful for calculating many widely used measures of a company, like its market capitalization and earnings per share.
The number of shares outstanding can impact how liquid a stock is, which in turn often affects the volatility of its price. Analysts also watch for dramatic changes in shares outstanding, which can occur if a company buys back a lot of stock (which reduces the number of shares outstanding) or splits its stock (which increases the number of shares outstanding).
Can Float Be Higher Than Shares Outstanding?
No, float—short for floating stock or floating shares—can't be higher than shares outstanding. It's always a smaller figure because it only counts the number of shares available for investment and trading on financial exchanges. In contrast, shares outstanding include both tradeable shares on the open market and any restricted or closely-held/insider stock—essentially, all shares that a company has issued, So, float is always a portion of shares outstanding.