Definition
Free Float
Free float is the portion of a company's shares that is freely available for trading by the public, excluding locked or strategic holdings.
Free float excludes promoter holdings, government stakes, locked-in shares and other strategic holdings that are not actively traded. It determines a stock's liquidity and is the basis for free-float market capitalisation, which Indian indices like the Nifty and Sensex use to weight constituents.
A higher free float generally means better liquidity and lower manipulation risk. Free float is closely related to the minimum public shareholding norm, which sets a floor on how much must be held by the public.
Related terms
- Minimum Public ShareholdingMinimum public shareholding (MPS) is the SEBI rule requiring listed companies to keep at least 25% of shares with the public.
- Promoter vs Professional ManagementThis contrasts companies controlled by founding promoters with those run by professional managers and dispersed ownership.
- LiquidityLiquidity is how easily an asset can be bought or sold quickly without significantly moving its price.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.