Free Float Calculator

What Is Free Float?

Free float is the number of shares available for public trading.

It excludes shares that are:

• Held by company insiders
• Owned by governments
• Locked under IPO agreements
• Part of cross-holdings
• Restricted in voting trusts or treasury accounts

In simple terms, free float tells you how much of a company is actually circulating in the stock market.

Free Float Formula

The calculation is straightforward:

Free Float Shares = Total Shares Outstanding – Total Restricted Shares

Then:

Free Float Percentage = (Free Float Shares ÷ Total Shares Outstanding) × 100

And:

Free Float Factor = Free Float Shares ÷ Total Shares Outstanding

The factor is simply the percentage expressed as a decimal. For example:

• 80% free float = 0.80 free float factor

Most stock indices use the free float factor when adjusting market capitalization.

Inputs Used in the Free Float Calculator

The calculator you shared uses the following fields. Each one represents restricted shares that are excluded from free float.

1. Total Shares Outstanding

This is the total number of shares issued by the company.

It includes:

• Public shares
• Insider shares
• Restricted shares
• Government holdings

This is your starting number.

2. Insider Holdings (Executives, Directors, Employees)

These shares are owned by:

• Founders
• Company executives
• Board members
• Key employees

These shares are often not actively traded.

3. Government / Strategic Holdings

Some companies have:

• Government ownership
• Sovereign wealth fund holdings
• Strategic investors

These shareholders typically do not trade frequently.

4. Long-term Lock-up Shares (IPO, Private Equity)

When a company goes public, early investors may be subject to lock-up periods.

These shares cannot be sold until the restriction period ends.

5. Cross-holdings / Strategic Corporate Stakes

This includes shares held by:

• Partner companies
• Parent companies
• Subsidiaries

These are long-term holdings, not market-traded shares.

6. Other Restricted Shares (Treasury, Voting Trusts)

Examples include:

• Treasury shares
• Shares under voting agreements
• Legally restricted stock

These are not part of free float.

Step-by-Step Example

Let’s walk through a simple example.

Company Data:

• Total Shares Outstanding: 10,000,000
• Insider Holdings: 2,000,000
• Government Holdings: 1,000,000
• Lock-up Shares: 500,000
• Cross-holdings: 300,000
• Other Restricted: 200,000

Step 1: Add Restricted Shares

2,000,000 + 1,000,000 + 500,000 + 300,000 + 200,000
= 4,000,000 restricted shares

Step 2: Calculate Free Float Shares

10,000,000 – 4,000,000 = 6,000,000

Step 3: Calculate Free Float Percentage

(6,000,000 ÷ 10,000,000) × 100 = 60%

Step 4: Free Float Factor

6,000,000 ÷ 10,000,000 = 0.60

This company has 60% free float.

Liquidity Classification Explained

Your calculator also provides a liquidity classification based on free float percentage.

Here’s how it works:

Higher free float usually means:

• Easier buying and selling
• Lower price manipulation risk
• Better price discovery
• Higher trading volume

Lower free float often leads to:

• Higher volatility
• Larger price swings
• Lower liquidity
• Wider bid-ask spreads

Why Free Float Matters for Investors

Free float affects several important areas.

1. Liquidity

Stocks with high free float are easier to trade. There are more shares available in the market.

Low free float stocks can move sharply even with small trading volumes.

2. Index Weighting

Major stock indices use free float-adjusted market capitalization.

That means companies are weighted based only on publicly tradable shares, not total outstanding shares.

This ensures fair representation.

3. Volatility

Low free float stocks tend to be more volatile.

If only 20% of shares are tradable, supply is limited. A small surge in demand can push prices up quickly.

4. Institutional Investment

Large funds prefer high free float companies.

Why?

Because they can enter and exit positions without moving the stock price too much.

Free Float vs Market Capitalization

Market capitalization is:

Total Shares Outstanding × Share Price

But free float market capitalization is:

Free Float Shares × Share Price

Many indices use free float market cap instead of total market cap.

This makes free float calculation essential for accurate valuation comparisons.

Common Mistakes When Calculating Free Float

Here are a few errors to avoid:

• Counting treasury shares as free float
• Ignoring lock-up restrictions
• Forgetting cross-holdings
• Using outdated share data
• Allowing restricted shares to exceed total shares

Your calculator prevents one major mistake: it checks that restricted shares do not exceed total shares outstanding.

When Should You Use a Free Float Calculator?

You should use it when:

• Analyzing IPO stocks
• Comparing companies in the same sector
• Evaluating liquidity risk
• Studying index inclusion impact
• Researching small-cap stocks

It’s especially useful for traders dealing with low-float stocks.

How to Use the Free Float Calculator

1. Enter Total Shares Outstanding
2. Fill in each restricted share category
3. Click “Calculate Free Float”
4. Review:
   • Free Float Shares
   • Free Float Percentage
   • Free Float Factor
   • Total Restricted Shares
   • Liquidity Classification

If needed, click “Reset” to clear inputs.