Floating stock refers to the number of shares available for trading of a particular stock. In floating stocks, there are low float stocks, it means that these are the stocks which shares are low. The calculation of floating is by subtracting closely-held shares. Then, restricted stocks from the firm’s outstanding shares are also in the calculation. The meaning of closely-held shares are shares owned by insiders, employees and major shareholders. Meanwhile, restricted stocks are untradeable insider stocks due to some temporary restrictions. It is like the lock-up period after an IPO or Initial Public Offering.
Floating stock, also known as the float, refers to the number of shares of a company’s stock that are available for trading on the open market. It represents the total number of outstanding shares of a company’s stock minus the number of shares that are held by insiders, such as executives, directors, and major shareholders, and the number of shares that are held by institutional investors or other long-term holders.
Practically, a small float stock is more volatile than a large float stock. The reason is because when shares available are few, it might be challenging to find a buyer or seller. Therefore, it could result in larger spreads and lower volume. In some cases, although a company owns a larger number of shares outstanding, there is a possibility they have limited floating stock. Investors often pay attention to the float when making investment decisions, as stocks with a small float can be more susceptible to manipulation or sudden changes in market sentiment. However, it’s important to consider other factors, such as the company’s financial health and growth prospects, when making investment decisions.