What is free float in stocks?

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What is free float in stocks? Blog Image

Overview:

Recently, index provider MSCI said it has cut the free-float designations of four securities of India's Adani group.

About Free Float:

  • The free float is also known as Public float which refers to the shares of a company that can be publicly traded and are not restricted.
  • It generally excludes promoters' holding, government / strategic holding and other locked-in shares, which will not come to the market for trading in the normal course. 
  • Free Float=(Outstanding shares-Restricted Shares-Closely held shares)
    • Outstanding shares refer to the number of shares held by all of the company’s shareholders
    • Restricted shares refer to shares that are not transferable until certain conditions are met. Restricted shares are generally held by corporate management, such as executives and directors.
    • Closely-held shares refer to shares that are typically held onto for a very long-term basis. Examples include major long-term shareholders and insiders.
  • Free Float Methodology is used to provide a more accurate reflection of market movements and stocks actively available for trading in the market.
  • The free-float methodology has been adopted by many of the world's major indexes.
  • MSCI calculates free float-adjusted market capitalization for each security to calculate the weights of the securities in the MSCI indexes

 


Q1) What is MSCI?

MSCI is an acronym for Morgan Stanley Capital International. It is an investment research firm that provides stock indexes, portfolio risk and performance analytics, and governance tools to institutional investors and hedge funds.

Source:  MSCI cuts some Adani group companies' free-float designations