What it is
Public float is the number of a company’s shares that the public can buy and sell. Also called free float, these are the shares that you can trade in secondary markets like the Philippine Stock Exchange (PSE).
Companies that want to sell their shares on the PSE or be included in its indices must meet a certain public float level. Take note that a company’s free float doesn’t necessarily reflect its total shares.
Free float doesn’t include closely-held and restricted stocks, which are often owned by company insiders, employees, or big private investors. These are not available for public trading.
What it means for you
You may want know a company’s public float when choosing stocks to invest in. The float level can affect how quickly a stock price goes up and down, also known as its volatility.
With a larger public float, the price won’t change much when investors trade a small number of shares. Price is easier to influence when the free float is low, because even the few stocks being traded could represent a sizeable amount of the available shares.
Stock float can also tell you how much of a company’s shares is publicly available and how much is held by insiders or major shareholders. In case a big shareholder decides to sell, you’ll understand to what degree the stock price could be affected.
If the management decides to do so, a company can increase its public float via a stock split. To lessen its free float, it may conduct a reverse stock split or buy back its shares.
