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Simple English definitions for legal terms
public float
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A quick definition of public float:
Public float is the part of a company's stock that is owned by regular people who buy shares, rather than by the company's owners or people who work for the company. The Securities and Exchange Commission (SEC) calculates public float by multiplying the number of shares owned by regular people by the current market price of the stock. When a company first goes public and sells shares to the public, those shares are also included in the public float.
A more thorough explanation:
Public float refers to the portion of a public company's outstanding stock that is owned by public investors. This excludes stock held by controlling interests, directors, officers, or other non-public entities.
The Securities and Exchange Commission (SEC) calculates public float by multiplying the number of a company's common shares held by non-affiliates by the market price. For an initial public offering (IPO), the shares issued in the IPO are added to the calculation.
For example, if a company has 1 million outstanding shares and 200,000 of those shares are held by insiders, the public float would be 800,000 shares. If the market price of each share is $10, the public float would be valued at $8 million.
Public float is important for investors because it can affect the liquidity and volatility of a stock. A larger public float generally means more shares are available for trading, which can increase liquidity and reduce volatility.