# What is free float?

The concept of free float, in English known as free float, refers to the number of shares in circulation that are available to users to acquire through the market bursátil. These shares do not remain controlled by the dominant group or the company's strategic investors, so they could be freely bought in secondary markets.

The term free float can be used as a representative measure of the size of the mercado, of the real value of the different shares that are available for trading by investors. This situation supports the fact that the larger the free float and the size of a listed company, the more liquid it provides and the more options the investor will have to find a seller if they intend to acquire shares or to attract a buyer if they seek to sell them.

## Calculate free float

Here we show you the floating capital formula:

Floating Capital = Outstanding Shares - Restricted Shares.

It should be noted that the outstanding shares are the total number of shares in which the company's capital is structured, while those restricted with the shares held by the shareholders included in the dominant group. These shares are not available for sale.

To better understand this concept we will turn to an example of floating capital. A listed company has a capital of 100 million euros divided into 1 million actions, so each participation would have a value of 100 euros. This capital would be controlled by two groups of controlling shareholders, where one would have 20% and the other with 25%. That is, 200.000 shares and 250.000 shares of 100 euros each.

Floating capital = 1.000.0000 - (200.000 + 250.000) = 550.000 shares. This means that this company dedicates 55% of its capital to floating capital, while the rest will remain in the hands of large investors.

Categories F