What it means
A company can have millions of shares outstanding without all of them being readily available in the market. Free float describes the shares generally available for public trading. It typically excludes closely held stakes, such as shares held by founders, executives or controlling shareholders that are not readily traded.
Free float is a share count, not the number of shares offered for sale at this moment. It can also be expressed as a percentage of shares outstanding. What counts as a restricted or strategic holding depends on the data provider’s methodology, so two reported float figures can differ.
How it is calculated
Free float (shares) = shares outstanding − non-float shares
- Shares outstanding: issued shares currently held by investors, including insiders; measured in shares.
- Non-float shares: outstanding shares excluded because they are not considered readily available for public trading; measured in shares.
- Free float: the resulting number of shares considered available for public trading; measured in shares.
To express the result as a percentage, use Free-float percentage = (free float ÷ shares outstanding) × 100%. Both share counts must refer to the same company, share class and date. Free-float percentage is a percentage of outstanding shares, not a percentage of the company’s authorized shares.
The classification matters as much as the arithmetic. A share held by a long-term investor is not automatically excluded: a data provider must decide whether that holding meets its criteria for a non-float stake. Check the provider’s definition when comparing figures.
Worked example
Suppose a hypothetical company has 10 million shares outstanding. Its founders and other holders have 4 million shares that the chosen data provider classifies as non-float. Assume no other shares are excluded.
- Subtract the non-float shares: 10 million − 4 million = 6 million shares of free float.
- Divide by shares outstanding: 6 million ÷ 10 million = 0.60.
- Convert to a percentage: 0.60 × 100% = 60%.
If the stock has a hypothetical price of US$20 per share, its float-adjusted market value is 6 million × US$20 = US$120 million. That is distinct from its total market capitalization of 10 million × US$20 = US$200 million. Neither figure states how many shares could be bought or sold immediately at US$20.
Why it matters before you trade
Free float describes potential supply, not the liquidity available at a particular price. A smaller float can mean fewer shares are potentially available from public holders. But it does not, by itself, establish that a stock will have a wide bid-ask spread or that an order will move its price.
For an execution check, consider free float alongside average daily volume, current quotes, market depth and the proposed order size. For example, an order may be small relative to the company’s float but large relative to a typical day’s trading volume. That distinction matters when assessing possible spread costs, market impact and partial fills. Trading conditions can also change even when the reported float has not.
How PreTrAIde uses it
PreTrAIde’s stated quantitative measures include liquidity scoring and tiering, participation in daily volume, estimated bid-ask spread and market impact. Its data enrichment includes company-profile fields, but the product facts do not specify free float as an input or calculation. It would therefore be inaccurate to say that PreTrAIde calculates or directly uses free float.
In a PreTrAIde pre-trade analysis, users submit a stock basket before placing orders. The resulting verdicts and execution information are decision support, not recommendations; users place any trades through their own broker. Free float can provide background context for a separate liquidity check, while the specified PreTrAIde measures address trading activity and estimated execution conditions.
Common mistakes
- Treating float as shares outstanding: Float excludes holdings classified as unavailable for public trading; shares outstanding includes them.
- Treating float as order-book depth: Float does not show the shares currently offered at a given price.
- Assuming a fixed figure: Share issuance, buybacks and changes in excluded holdings can alter reported float. Check the figure’s date.
- Comparing unlike definitions: Providers may classify strategic or restricted holdings differently, and different share classes may have different floats.
- Using float alone to estimate execution cost: Order size, trading volume, spread and market depth are separate considerations.