Free float
Capital MarketsThe proportion of a company's shares genuinely available to trade, rather than held by insiders, sponsors or strategic holders.
Also written: free-float, shares in public hands, public float
Free float is the part of the share register that will actually change hands. Shares held by a founder, a sponsor, a parent or a strategic partner are excluded, because they are not available to the market at any normal price.
It matters in three ways at once. Listing regimes set a minimum for eligibility, index providers apply their own thresholds and then weight positions by float, and liquidity is a direct function of it. A company below the index thresholds is invisible to a large pool of passive money that would otherwise be a forced buyer.
The old UK premium segment required a quarter of the shares to be in public hands, and the reformed UK regime cut that floor sharply as part of making London more competitive. The regulatory floor moving does not move the commercial reality: a thin float means a volatile aftermarket, wider spreads and thinner research coverage.
It also interacts with the seller's intentions. A sponsor that floats the minimum keeps control and keeps most of its position, but every institution in the book knows the rest of the stake must eventually come out, so the shares carry that overhang from the first day and lock up expiry becomes a scheduled event the market prices in advance.
Worked example
A company lists with 100 million shares, of which the sponsor retains 82 million and 18 million are sold into the market.
The float is 18%. It clears the listing floor, but it may sit below the thresholds some index providers apply, and daily liquidity is set by those 18 million shares rather than by the full count.
The 82 million shares still to come are the overhang. They do not affect the offer price directly, but they affect what investors will pay for a share they know will face supply later.