Float

Low-float stocks are volatile: a moderate buy/sell imbalance can move them 20% on the day. High-float large caps absorb order flow without much price movement. Float matters most to day traders looking for explosive movers. ### What the number actually is Float is what survives after you strip out every share that cannot legally be sold into the market today. The regulator has its own version of it. Under SEC Rule 12b-2, a company's *public float* is the aggregate worldwide market value of its voting and non-voting common equity **held by non-affiliates**, measured at the last sale price on the last business day of its most recently completed second fiscal quarter. The exchange draws the same line. Nasdaq excludes securities subject to resale restrictions from its count of publicly held shares. To list on the Nasdaq Capital Market a company needs at least **1 million unrestricted publicly held shares** and **300 round lot holders**. Not shares outstanding. Unrestricted ones. The gap between those two numbers is the whole point of the term. ### What gets stripped out Index providers publish the cleanest breakdown of what is removed. FTSE Russell's *Free Float Restrictions* rules strip out shares held by corporations, employee share plans, foundations, government agencies, treasury shares, venture capital and private equity, and disclosed individual holders including officers and directors. Where a single portfolio holding reaches **30% or more** it is treated as strategic and restricted until it falls back below 30%. Shares subject to lock-up provisions come out of free float too. That list is the anatomy of the gap between shares outstanding and float. It answers one question: who is actually able to sell. ### Float is a gate, not a constant Locked shares do not stay locked, and this is where most people get lazy. SEC Rule 144 sets the terms of release: an affiliate cannot sell, in any three-month period, more than the greater of 1% of the outstanding shares of that class or the average reported weekly trading volume over the four weeks preceding the Form 144 notice. Restricted securities carry a six-month holding period if the issuer is an Exchange Act reporting company, a full year if it is not. So float is a valve that opens on a schedule. Lock-ups expire. Holding periods run out. New shares get registered. The float number you screened last month may not be the float you are trading today. ### Why it matters to you Float is the equities version of what this glossary calls *liquidity*. A thin float means a shallow book, and a shallow book means your fill degrades and your slippage widens at exactly the moment the move is fastest, which is when you most need it not to. The 20% day in the definition above is not mystique. It is shallowness expressing itself. **The common mistake:** reading float off a screener as a hard fact. It is a lagging estimate derived from filings. Treat it as a snapshot with a date on it, not a constant.