Free Float

Free float strips out the shares that are not realistically available to trade. Founder and director holdings, escrowed stock from a recent listing or acquisition, cornerstone and strategic corporate stakes, and holdings a parent company has no intention of selling are all excluded. What remains is the pool that actually changes hands and, importantly, the pool from which shares can be borrowed.

The distinction has a direct effect on short selling. A stock with 60% of its register locked up has only 40% of its shares in circulation, so a short position equal to 5% of shares on issue is really 12.5% of the tradeable stock. Every squeeze mechanic — borrow scarcity, price impact on covering, days to cover — scales against the float, not against the total register.

Float also drives lendable supply, which is narrower again. Only holders who participate in securities lending programmes contribute, so retail holdings held outside lending arrangements and institutions that decline to lend fall out of the pool. Utilisation is measured against that lendable subset, which is why a stock with a modest short position can still be hard-to-borrow if few of its holders lend.

In Australia, index construction uses float-adjusted market capitalisation. S&P applies investable weight factors when compiling the S&P/ASX indices, so a company with a large controlling shareholder receives a smaller index weight than its full market cap implies. That affects passive demand and makes index rebalance dates significant events for low-float names.

The short interest percentages published by ASIC and shown on this site are calculated against total shares on issue, not float, because shares on issue is the figure in the official data. Where a stock has a tightly held register, the effective short interest against tradeable stock is higher than the published number.

A tight float is usually visible from the disclosure record rather than any single published statistic. The top twenty holders listed in the annual report, substantial holding notices lodged under section 671B, escrow terms disclosed in a prospectus, and a recent listing or demerger all point to stock that is unlikely to trade. Persistently low turnover relative to market capitalisation points the same way.