Free float refers to the percentage of a company's total voting shares that are freely traded and could therefore be held by anyone. Affiliated firms, directors, or even the government typically own the rest. So if a company has issued 100,000 voting shares, but 60,000 are held by the government and another 30,000 by its directors, the 'free float' is just 10%.
This can have odd consequences. For example, sudden demand for the few shares that "free float" can have a disproportionate effect on a firm's estimated market value, which is usually based on its voting shares. If the share price jumps from £2 to £10, the firm's value goes from £200,000 to £1,000,000, even though relatively few shares have been traded.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
-
What is the 25x retirement rule and does it work?The 25x retirement rule has been around for decades but many experts question if it is a suitable strategy
-
When is the self-assessment tax return deadline?If you are self-employed, rent out a property or earn income from savings or investments, you may need to complete a self-assessment tax return. We run through the deadlines you need to know about
