Free Float Calculator

Created by Wei Bin Loo
Reviewed by Dominik Czernia, PhD and Adena Benn
Last updated: Jan 15, 2023

We have prepared this free float calculator for you. It calculates the number of free float shares a company has.

After reading this article, you will understand what free float is and how to calculate the free float shares. Furthermore, you will find some practical free float calculation examples to help you understand the concept better.

What is free float shares?

Free float shares are the shares widely traded in the market. They are the shares that are not restricted and not closely held by the insiders. These are the highly liquid shares. They are available to investors in the market.

How to calculate free float shares

Now, let's discuss how to calculate free float shares and free float percentages. Let's take Company Alpha as an example. Company Alpha has:

  • Number of outstanding shares: 10,000;
  • Number of restricted shares: 2,000; and
  • Number of closely-held shares: 1,000.

You can calculate the free float shares in four steps:

  1. Determine the number of shares outstanding:

    The shares outstanding is the total number of shares the company has. For Company Alpha, the number is 10,000.

  2. Determine the number of restricted shares:

    The next step is to determine the restricted shares, which are the shares issued by the company to its employees but are currently non-transferable. The restricted shares for our example is 2,000.

  3. Determine the number of closely-held shares:

    The closely-held shares are shares that long-term shareholders or insiders hold, hence rarely traded. The number for Company Alpha is 1,000.

  4. Calculate the free float and free float percentage:

    The final step is to calculate the free float using the free float formula below:

    free float = shares outstanding - restricted shares - closely-held shares

    Thus, the free float for Company Alpha is 10,000 - 2,000 - 1,000 = 7,000.

    If you want to calculate the free float percentage, you can use this formula:

    free float percentage = free float / outstanding shares × 100.

    For Company Alpha, the free float percentage is 7,000 / 10,000 × 100 = 70%.

    If you want to know more about percentage calculation, please use our percentage calculator.

You can also use the free float calculator to get the result without tedious manual computations.

Why it is important to understand the free float definition?

Now that we have looked at the free float calculation example, let's spend some time understanding the implication of the metrics.

The higher the free float percentage, the higher the liquidity of the shares. This means it will be easier for investors to sell and buy the shares if the free float percentage is high. TO understand more about liquidity, check out our LCR calculator.

FAQ

Can free float be negative?

No, the free float cannot be negative. This is because the free float is the number of shares available for the public in trading, and there is no such thing as a negative number of shares.

What are restricted shares?

Restricted shares are unregistered, non-transferable shares issued by the company to its employees. They are not available to the public.

Companies use restricted stares as either employee compensation or incentive. For employees, it creates an interest in the welfare of the company.

How do I calculate free float?

You can calculate the free float in four steps:

  1. Determine the number of shares outstanding.
  2. Determine the number of restricted shares.
  3. Determine the number of closely-held shares.
  4. Apply the free float formula:
    free float = shares outstanding - restricted shares - closely-held shares.

How do I calculate free float percentage?

You can calculate the free float percentage in five steps:

  1. Determine the number of shares outstanding.
  2. Determine the number of restricted shares.
  3. Determine the number of closely-held shares.
  4. Apply the free float formula:
    free float = shares outstanding - restricted shares - closely-held shares.
  5. Apply the free float percentage formula:
    `free float percentage = free float / outstanding shares × 100.

What is the free float percentage if there are 2,000 free floats and 5,000 shares outstanding?

The free float percentage is 40%.

You can calculate the free float percentage by dividing 2,000 by 5,000. Next, you multiply the answer by 100.

Wei Bin Loo
Outstanding shares
shares
Restricted shares
shares
Closely held shares
shares
Free float
shares
Free float percentage
%
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