Public float or free float represents the portion of shares of a corporation that are in the hands of public investors as opposed to locked-in stock held by promoters, company officers, controlling-interest investors, or government. This number is sometimes seen as a better way of calculating market capitalization because it provides a more accurate reflection than entire market capitalization of what public investors consider the company to be worth. In this context, the float may refer to all the shares outstanding that can be publicly traded.

The float is calculated by subtracting the locked-in shares from outstanding shares.

For example, a company may have 10 million outstanding shares, with 3 million of them in a locked-in position; this company's float would be 7 million. Stocks with smaller floats tend to be more volatile than those with larger floats.

In general, the large holdings of founding shareholders, corporate cross-holdings, and government holdings in partially privatized companies are excluded when calculating the size of a public float.

There are certain regulations to offer public floats, though these regulations might differ from region to region.

What is a Stock's "Float" And Why is it Important?

For instance to offer public float in the UK, a company must be incorporated, i. Also, the company should have published or filed audit accounts for at least a three-year period, have trading and revenue earning records for at least three years, its higher management and directors must be competent enough to run a business at that scale, and the company must show that it has a working capital for at least 12 months.

By public floating, companies gain access to new and large capital as general public can invest in the company making it easy for the company to get capital.

By public floating company gains access to interest free capital as there is no interest to be paid on shares. Though dividend is involved but terms of dividend are far more flexible than terms for loans.

By public floating companies can enhance their credit image.

* Flotation (Stock market) - Definition,meaning - Online Encyclopedia

Along with enhanced credibility companies can also get higher media coverage and attention of general public. By public floating companies are vulnerable to threats of speculations and market fluctuations. As in financial crises several companies went bankrupt because of fluctuations in stock market. Costs of company registration are also very high making it difficult for certain small businesses to public float.

Along with higher costs processes of registering and running a company are also very complex. Along with this a comprehensive accounting record is also needed like sales and whom they are made to until and unless it is a retail business , Purchases and from whom they are done stock and debts all of them are necessary to be provided.

Public floating also increases pressure on a company to perform. Whenever the general public, as company shareholders, demand dividends without keeping the company's economic circumstances in proper perspective, it increases performance pressure on the company.

S government in Less public float may cause illiquidity of stocks of companies due to the low public holdings. One may not be able to transact buy or sell orders on a respected stock exchange.

Flotation

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Flotation Definition from Financial Times Lexicon

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