Understanding Floating Stock: A Key Indicator for Investors

Discover the significance of floating stock, how it’s calculated, and what it means for your trading strategy.

Floating stock refers to the number of shares of a particular stock that are available for trading in the open market. Stocks with low floating shares are typically characterized by high volatility. Floating stock is calculated by subtracting closely-held and restricted shares from a company’s total outstanding shares.

Closely-held shares are those owned by insiders, significant shareholders, and employees. Restricted stock consists of insider shares that are not available for trading due to certain restrictions, such as the lock-up period following an initial public offering (IPO).

A stock with a smaller float tends to be more volatile due to fewer shares being available for trading. This can lead to higher spreads and lower trading volume.

Key Takeaways

  • Floating stock represents the number of shares a company has available to trade in the open market.
  • To calculate floating stock, subtract the company’s restricted stock and closely held shares from its total number of outstanding shares.
  • The amount of floating stock can change over time due to new share issues, share buybacks, or changes in insider or major shareholder ownership.
  • Low float stocks typically exhibit higher volatility and wider spreads.
  • Investors might find it challenging to enter or exit positions in stocks with low float.

Understanding Floating Stock: A Closer Look

A company may have a significant number of shares outstanding but still have limited floating stock. For instance, assume a company has 50 million shares outstanding. If large institutions own 35 million shares, management and insiders own 5 million, and the employee stock ownership plan (ESOP) holds 2 million shares, the floating stock is only 8 million shares (50 million shares minus 42 million shares), accounting for 16% of the outstanding shares.

Floating stock levels can change for various reasons. A company might issue additional shares to raise capital, increasing the floating stock. If restricted or closely-held shares become unrestricted, the floating stock also increases. Conversely, share buybacks reduce the outstanding shares, thus lowering the floating stock. A stock split will increase floating shares, whereas a reverse stock split will decrease float.

Why Floating Stock Is Important

The floating stock number is crucial for investors as it indicates the shares available for public trading. Low float usually hampers active trading, leading to difficulties in entering or exiting positions. This lack of trading activity makes stocks with limited float less appealing to institutional investors.

Institutional investors avoid trading in smaller float companies due to limited shares, low liquidity, and wider bid-ask spreads. Instead, such investors prefer investing in companies with larger floats, where large purchases are less likely to impact the stock price significantly.

Special Considerations

A company cannot control how shares within the float are traded by the public. This is managed by the secondary market. Thus, investor trades do not affect the floating stock—they merely redistribute existing shares. Similarly, the creation and trading of options do not impact the floating stock.

Practical Example of Floating Stock

As of September 2023, General Electric (GE) had 1.088 billion outstanding shares. Out of these, 0.20% were held by insiders and 75.81% by large institutions. Therefore, approximately 76%, or 830 million shares, were not available for public trading, making the floating stock about 260 million shares (1.088 billion - 830 million).

It’s important to note that institutions don’t consistently hold a stock. Changes in institutional ownership can signal broader trading trends—decreasing ownership may indicate that institutions are selling shares, while increasing ownership may indicate accumulation.

Evaluating Floating Stock: Is It Good or Bad?

The concept of stock float isn’t inherently good or bad, but it impacts investor decisions. High float stock tends to have lower volatility and higher liquidity, making it easier for investors to trade. Conversely, low float stocks experience more volatility, presenting unique trading challenges.

What Is Stock Flotation?

Stock flotation involves a company issuing new shares to the public to raise capital. The opposite is float shrink, often resulting from stock buybacks, which reduce the number of available shares.

Differentiating Floating and Non-Floating Shares

Floating shares are those available for trading, while non-floating shares are held by insiders and not available for trading.

The Bottom Line

Floating stock represents the shares a company has available for market trading. Traders usually prefer high float stocks as they facilitate easier and more liquid entry and exit positions. Stocks with high floats offer greater liquidity, allowing investors smoother trades.

Related Terms: restricted stock, IPO, spreads, liquidity, bid-ask spreads, reverse stock split.


  1. Macrotrends. “General Electric Shares Outstanding 2010-2023”.
  2. Yahoo Finance. “General Electric Company (GE) Major Holders”.

Get ready to put your knowledge to the test with this intriguing quiz!

--- primaryColor: 'rgb(121, 82, 179)' secondaryColor: '#DDDDDD' textColor: black shuffle_questions: true --- ## Which of the following best defines floating stock? - [x] Shares of a company’s stock that are available for trading by the public - [ ] Shares held by a company's executives and institutional investors - [ ] Shares that have been bought back by the company - [ ] Shares given as part of an employee stock ownership plan ## Which type of shares are included in floating stock? - [x] Publicly traded shares - [ ] Shares held by the company’s executives - [ ] Treasury shares (shares bought back by the company) - [ ] Restricted shares ## How do you calculate floating stock? - [x] Total shares outstanding minus restricted shares and insider holdings - [ ] Total shares outstanding multiplied by the share price - [ ] Market capitalization divided by share price - [ ] Total revenue divided by the number of shares ## Why is floating stock important to investors? - [x] It indicates the liquidity and market activity of a company’s shares - [ ] It shows the company's financial performance - [ ] It reflects the company’s total market valuation - [ ] It identifies the company’s profitability ## What could a low floating stock indicate about a company’s shares? - [ ] High liquidity - [x] Low liquidity - [ ] High market capitalization - [ ] Frequent stock splits ## Which entity typically does NOT hold floating stock? - [ ] Hedge funds - [ ] Retail investors - [x] Company insiders with restrictions on selling - [ ] Mutual funds ## If a company issues more shares to the public, how does that affect floating stock? - [x] It increases floating stock - [ ] It decreases floating stock - [ ] It has no effect on floating stock - [ ] It converts floating stock to restricted stock ## Which of the following actions can decrease the floating stock of a company? - [ ] Stock split - [x] Stock buyback - [ ] Issuing additional shares to the public - [ ] Rising share prices ## Companies with high institutional ownership typically have: - [ ] High floating stock - [x] Low floating stock - [ ] High revenue - [ ] Low volatility ## Why might a company choose to limit its floating stock? - [x] To prevent excessive market manipulation and high volatility - [ ] To avoid paying dividends - [ ] To reduce the number of shareholders - [ ] To increase shares held by employees