Public float is a term that is used to identify shares of stock that are made readily available to the general public for purchase. Shares of this type represent only a portion of the total shares issued by a company. The remainder of the shares are normally made available to individuals who are officers or owners in the business, as well as directors and employees in general. Shares that are part of the public float are intentionally set aside for offering to the public and are the most common category of stock that is traded on public exchanges.
For investors in general, the public float represents the amount of opportunity to acquire shares and establish an investment in the issuing company. At any given point in time, an investor may monitor the marketplace to determine how many public shares are currently available, and arrange to buy a portion of those shares. Over time, the public investor may acquire enough shares to have a significant amount of interest in the company, although that interest is usually not enough to gain control of the business. This is because most companies make it a point to maintain control of at least 51% of the issued shares either in the direct control of owners and employees, or others who are considered controlling-interest investors and are highly likely to support the owners.
The exact portion or amount of public float associated with any particular stock option will vary from time to time. Should some series of events prompt a number of investors to offer their shares for sale in one or more markets, the amount of public float actually increases. At the same time, if the number of outstanding shares being traded in the market decrease, usually because investors are choosing to hold onto those shares, the public float is considered reduced.
There are several factors that may contribute to changes in the public float. One has to do with a rising degree of confidence in the future of the issuing company. In this scenario, investors have projected an upswing in the value of the stock within a defined period of time, and move to acquire shares before that upward price movement begins to take place, earning a significant amount of return. At the same time, event such as changes in the leadership of the issuing company, political shifts, changes in the economy and even the occurrence of some catastrophic disaster may negatively impact the prospects for a given company. When this happens, the stock issued by that company is likely to begin decreasing in value, prompting investors to sell before the share price goes any lower. At that point, the public float increases as more and more investors seek to sell off their shares and avoid additional losses.
