Floating Shares

Floating Shares

The shares of a publicly-traded company available to trade. There may be fewer floating shares than shares outstanding: some shareholders may buy and hold, reducing the number of the floating shares. The number of floating shares greatly affects a stock's volatility. If there are relatively few floating shares, any number of activities could greatly affect its price, especially a single large order to buy or sell. This would greatly alter the number of shares available to trade, creating too little or too much supply and therefore driving the price up or down. A large number tends to have less volatility because large orders do not affect the supply as much. It is also called a floating supply. See also: Technical condition of a market.

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Floating shares. Floating shares are shares of a public corporation that are available for trading in a stock market.

The number of floating shares may be smaller than the company's outstanding shares if founding partners, other groups with a controlling interest, or the company's pension fund, employee stock ownership plan (ESOP), or similar programs hold shares in their portfolios that they aren't interested in selling.

Some equity index providers, including Standard & Poor's, use floating shares rather than outstanding shares in calculating their market-capitalization weighted indexes on the grounds that a float-adjusted index is a more accurate reflection of market value.