Stock market basics · updated October 21, 2026
What is a stock's free float and how is it calculated
Free float is the part of a company's shares that trades freely, leaving out those held by the government, founders or large shareholders who do not sell. A small free float means fewer shares available and, often, poor liquidity.
Free float formula
- Freely traded shares
- All shares minus those held by the government, founders, management and strategic shareholders.
Worked example
A company has 100 million shares, and the government holds 80 million that it does not sell.
Only 20 million shares actually trade on the exchange.
How to read free float
Major indices, like the S&P 500 or MSCI, weight each company by its free float, not by all its shares.
When free float can fool you
The majority owner decides: with a 70-80% shareholder, the big decisions (dividends, investments) depend on them. Large sales: when the big shareholder sells a block, the price can drop.
Related terms
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Questions about free float
Why does free float matter?
Because it shows how many shares can actually be bought and sold. With a small free float, a few large orders can move the price a lot.
These explanations are for information only. They are not a recommendation to buy or sell.
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