Rajandran R Telecom Engineer turned Full-time Derivative Trader. Mostly Trading Nifty, Banknifty, USDINR and High Liquid Stock Derivatives. Trading the Markets Since 2006 onwards. Using Market Profile and Orderflow for more than a decade. Designed and published 100+ open source trading systems on various trading tools. Strongly believe that market understanding and robust trading frameworks are the key to the trading success. Writing about Markets, Trading System Design, Market Sentiment, Trading Softwares & Trading Nuances since 2007 onwards. Author of Marketcalls.in)

Understanding Free Float of the Company

2 min read

Free float, also known as public float, is a measure of the portion of a company’s outstanding shares that is available for trading on the public market. It is calculated by subtracting restricted shares (held by insiders, such as company executives and directors) from the total number of outstanding shares. The free float represents the portion of a company’s equity that is available for purchase by the general public and is used to determine the liquidity of a company’s stock.

A high free float indicates that there is a large number of shares available for trading, making it easier for investors to buy and sell the stock. A low free float, on the other hand, can result in lower liquidity and higher volatility, as there are fewer shares available for trading.

Reliance Key Statistics with Free Float and Shares Outstanding Data

Understanding the free float of a company is important for investors, as it provides insight into the liquidity and volatility of a company’s stock. It can also impact the weight of a company in index funds and other financial products that use market capitalization as a weighting factor.

It’s also worth noting that the float is dynamic and can change over time as more shares are issued, insiders sell restricted shares or other factors. Understanding the float of a company can help investors make informed investment decisions, but it should not be the only factor considered when evaluating a stock.

What is Outstanding Shares?

Outstanding shares refer to the total number of shares of a company that have been issued and are outstanding, including both restricted and unrestricted shares.

How to Calculate the Float of the Public Company?

To calculate the float of a company, you can use the following formula:

Float = Total Outstanding Shares – Restricted Shares

Where Total Outstanding Shares is the number of shares of a company that are publicly available for trading, and Restricted Shares are the number of shares that are held by insiders, such as company executives and directors, and are not available for trading.

You can find the number of Total Outstanding Shares and Restricted Shares in a company’s financial statements, which are typically available on its investor relations website or on financial data websites such as Yahoo Finance or Google Finance.

It’s important to note that the float of a company can change over time, so it’s a good idea to regularly check the latest information. Additionally, it’s always a good idea to consult multiple sources and perform your own research before making investment decisions.

In summary:

  • Outstanding shares refer to the total number of shares of a company that have been issued and are outstanding.
  • Free float refers to the portion of outstanding shares that are available for trading on the public market.

Knowing the number of outstanding shares and the free float of a company can provide insight into the liquidity and volatility of its stock, and can impact the weight of a company in index funds and other financial products that use market capitalization as a weighting factor.

Lower Float of the Company is Vulnerable to Manipulation?

A lower float of a company can make it more vulnerable to manipulation. This is because a small float can result in lower liquidity and higher volatility, making it easier for a small group of investors to drive up the price of the stock. This can create opportunities for manipulative practices, such as spreading false or misleading information, insider trading, or coordinated buying and selling.

Adani Wilmar with Lower Free Float

For example, if a group of investors controls a significant portion of the available shares of a company with a low float, they can use their influence to drive up the stock price. When other investors see the stock price rising, they may buy in, further increasing demand and driving up the price even more. The manipulators can then sell their shares at a profit, leaving other investors holding the bag when the stock price inevitably crashes back down.

It’s important for investors to be aware of the potential for manipulation and to always do their own research before making investment decisions. Additionally, regulators often keep a close eye on companies with lower floats to prevent and detect manipulative practices.

Rajandran R Telecom Engineer turned Full-time Derivative Trader. Mostly Trading Nifty, Banknifty, USDINR and High Liquid Stock Derivatives. Trading the Markets Since 2006 onwards. Using Market Profile and Orderflow for more than a decade. Designed and published 100+ open source trading systems on various trading tools. Strongly believe that market understanding and robust trading frameworks are the key to the trading success. Writing about Markets, Trading System Design, Market Sentiment, Trading Softwares & Trading Nuances since 2007 onwards. Author of Marketcalls.in)

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