Float
Float, also known as free float or public float, refers to the number of a company's shares that are available for trading in the open market. It excludes restricted shares, such as those held by company insiders or shares repurchased by the company. Float is an important measure of a stock's liquidity, indicating how many shares are available for public trading. The formula for calculating float is:
Float=Total Shares Outstanding−Restricted Shares
Restricted shares typically include those held by company executives, directors, and large shareholders, which are subject to certain restrictions and cannot be sold immediately in the market.
Definition: Outstanding shares refer to the number of company shares that can be freely bought and sold in the securities market. It does not include restricted shares, such as those held by insiders or shares repurchased by the company. Outstanding shares reflect the number of shares available for trading in the market and are an important indicator of a company's stock liquidity. The formula for calculating outstanding shares is:
Outstanding Shares = Total Issued Shares − Restricted Shares
Restricted shares include those held by company executives, directors, and major shareholders. These shares usually have a lock-up period and cannot be immediately sold in the market.
Origin: The concept of outstanding shares developed with the evolution of the securities market. In the early stock markets, all shares could be freely traded. However, with the strengthening of corporate governance and market regulation, some shares were restricted from trading to prevent market manipulation and insider trading. These restricted shares were gradually excluded from outstanding shares, forming the concept of outstanding shares.
Categories and Characteristics: Outstanding shares can be divided into the following categories:
- Common Outstanding Shares: These are the most common type of outstanding shares, which any investor can freely buy and sell in the market.
- Preferred Outstanding Shares: These shares usually come with certain preferential rights, such as priority in dividends or liquidation, but may have lower liquidity compared to common outstanding shares.
The main characteristics of outstanding shares include:
- High Liquidity: Outstanding shares can be freely traded in the market, offering high liquidity.
- Price Volatility: Due to frequent trading, the prices of outstanding shares are more volatile and significantly influenced by market supply and demand.
Specific Cases:
Case 1: A company has issued a total of 10 million shares, of which 2 million shares are restricted shares held by company executives, and 8 million shares are outstanding shares. This means there are 8 million shares available for free trading in the market.
Case 2: A company conducts a stock buyback and repurchases 1 million shares. These repurchased shares are no longer counted as outstanding shares, thereby reducing the number of outstanding shares in the market, which may affect the stock's liquidity and price.
Common Questions:
1. What is the difference between outstanding shares and total shares?
Total shares refer to all shares issued by the company, including both outstanding shares and restricted shares. Outstanding shares are the portion of the total shares that can be freely traded in the market.
2. Why does the number of outstanding shares change?
The number of outstanding shares can change due to stock buybacks, new share issuances, or the lifting of restrictions on restricted shares.
