Floating Stocks

Floating Stocks

Floating stocks may sound complicated to define but they are as simple as their name, floating. These are the number of company’s outstanding shares that are available for trading in the open market. It is usual for a classic amateur marketer to have a misconception between shares outstanding and stock float but in this article, we will help you understand the stock float or at least the basics.

To define in simple terms, floating stocks are the number of company’s outstanding shares that are available to be traded in the open market.
Does this mean, all the outstanding shares of the company are available to be traded in the open market? No, not all of them.
In floating stocks, the company’s insider shares are not available to be traded in the open market. Here, by insider shares we mean, the shares that are restricted or closely held by the strong insider members of the company.
Floating stocks are one of the stock indicators of the company’s positions. It helps the marketers understand the stock’s liquidity and volatility. So, Floating stocks are to be considered in research when you are planning to buy/sell stocks of a particular company, it gives you a clearer picture.
A classic example for this situation can be, when the company has only below 25% of the floating shares available to be traded in the open market. This indicates, it might be difficult to find buyers or sellers in certain situation. Such scenarios are also called as a low float. These may act like downhill indicators for the marketer's choice of investment.

There are two important terms associated with the floating stocks, low stock float and high stock float. A low stock float indicates the company’s outstanding shares available for trading in open market are less as the company insiders own more of the stocks. This also indicates it may be hard to find others who are interested in buying or selling of these stocks. When there are no buyers and sellers for the stocks, it increases the stock’s volatility which is not a good sign for the stock investors. In low float stock situations, the companies may also face low liquidity periods compared to the high stock float.
Another term associated with the floating stocks is high stock float, it is a complete opposite of low stock float and indicates the company has more outstanding shares available to be traded in the open market. The stock volatility in high stock float is less as there are more buyers and sellers of these stocks in the open market. Besides, there are high liquidity periods compared to low stock floats which makes it more luring to the stock investors.

Outstanding shares or floating stocks are the shares that are available for trading in the open market excluding the closely held or restricted shares by the company’s major head. However, Shares Outstanding refers to all the shares of company’s stocks held by the shareholders. The shareholders include institutional investors, company insiders, and general investing public shareholders.

Stock float has no direct impact on individual investors especially for those who invest in pool funds such as Mutual funds and ETFs. Additionally, there is no direct impact on investors who invest for longer term in company stocks. This is because, there can be significant increase in the performance and the company lead to fall in high float stock. So, in that situation, it is the responsibility of the marketer to correctly assess the future of the company, vision, performance, growth, and more.
However, there is a direct impact on investors who buy or sell the stock frequently as in the short term, the stock volatility is high. Besides, the investors can face the low liquidity issues with the stocks with low floats and this increases the overall issues. So, if you are a short-term trader, it advisable to not get deep into floating stocks. You may end up selling the stocks at lesser price when you invest in low stock floats, it highly depends on the vision and performance of the company in near future for short term investing.

Summary

Floating stocks in not a complicated type of stocks, it is only the number of company’s outstanding shares that are available to be traded in the open market. However, these outstanding shares exclude the stocks that are restricted or held by the company’s closest and positioned employees or owners. There are two terms associated with floating stocks that required to understand how floating stocks work; these are low stock float and high stock float. Floating stocks are also an indicator of company’s position when you plan to invest in it. Low stock float indicates the company’s stocks are highly volatile and they have low liquidity periods; Meaning, it is hard to find marketers who are interested in trading such stocks. However, the high float stocks are a complete opposite of these.

  • What are floating stocks?
  • To define in simple terms, floating stocks are the number of company’s outstanding shares that are available to be traded in the open market.

  • What is low float stock?
  • A low stock float indicates the company’s outstanding shares available for trading in open market are less as the company insiders own more of the stocks.

  • What is high float stock?
  • High float stock indicates the company has more outstanding shares available to be traded in the open market.

  • What is the difference between Outstanding shares and shares outstanding?
  • Outstanding shares or floating stocks are the shares that are available for trading in the open market excluding the closely held or restricted shares by the company’s major head. However, Shares Outstanding refers to all the shares of company’s stocks held by the shareholders. The shareholders include institutional investors, company insiders, and general investing public shareholders.

  • Is Low Stock Float good or bad?
  • Major investors in the stock market consider low stock float as a bad metric. However, some of the marketers are looking for such stocks as they believe the company will perform and prosper in future and the selling price will increase. It is important to note such decisions are only to be made after a good research and involves high risk. Due to stock volatility, marketers may find it difficult to sell these stocks in the near future.