Public Float

Public float is the number of outstanding shares owned by the general public. Those owned by the company officers, directors and controlling parties are not included in this. When the insider held shares are not traded, they are public shares. When the restricted share is deducted from the outstanding share, float is obtained. If in ten shares, only seven are traded in public, then only those seven would be entitled to be called as public float. These values of the public shares are calculated by the price of the share multiplied with the number of shares held by non-affiliates. The price that a company assigns should either be the company’s equity that was last sold or the average bid of the asked prices of the equity within sixty days before the sale.

Factors of Public Offerings

When the capital in the equity market increases or if the price of the stock increases, company’s public float is also entitled to increase. When a company is registering to sell shares for the first time, its public sales is determined by three elements which would include the proposed price per share, number of shares held by non-affiliates before the float and number of shares to be sold at the calculated price. Based on the outstanding share figures, stock exchanges determine whether or not a company is eligible for the listings. These figures are obtained from the public shareholders, company directors and executives.

Initial public offering or IPO is the shares offered by small companies with the purpose to seek funds to expand further. The assistance of an underwriting service is sought for this purpose with which the suggestions regarding security, offering price and the time to execute the public float would be obtained. Sale of securities to more than 35 people would fall under the public float category.

Functioning of Public Floatation

Public float is the market capitalization with which a public corporation inclusive of its assets is freely traded through the purchase and sale of stock, thus determining the price of the company’s shares. The amount of shares held by a dominant share holder, government or another corporation is adjusted while calculating the float rate. These rates could be affected by speculations of mergers and acquisitions.

A clear definition of public float eligibility helps the government to carry out its policy without any confusion. Float management includes activities such as increasing shares outstanding, registering the stock, lockup agreements, simplifying capital structure, encouraging sale by large shareholders and avoiding stock repurchases.

Questions:

• What is public float?
• Comment a few words about Initial Public Offering.