Free float

It is the shares in issue less the shares that are not realistically for sale, reported either as a share count or as a proportion of the total. Index providers each publish their own definition of what counts as restricted, along with their own thresholds and rounding, and those definitions do not agree, so the same company can carry different float factors in two indices at the same time without either provider being wrong.

It matters because most major indices weight their constituents by float adjusted market capitalisation rather than by full capitalisation. A company with a large headline value but a small float therefore counts for less in the index than its size suggests, and the shares themselves tend to be thinner: the same order travels further through the book, and the price is more sensitive to the flows created when a provider reviews its weights. This is a live consideration in Gulf markets, where state and founding family holdings are often a large share of the register.

A low float is a fact about supply, not a judgement about the company, and the thing it reliably predicts is the cost of dealing rather than the return. Float also changes: lock up expiries, placements, buybacks and stake sales all move it, while the figure inside an index only moves when the provider reviews it, so the float used for weighting can lag the float on the register by months.