FREE FLOATING SHARES

What are free floating shares?

Free-floating shares refer to the shares of a company that can be publicly traded and are not held by insiders. Therefore, free-floating shares are the number of shares available to the public for trading in the secondary market.

Shares Outstanding vs. Free floating shares

A company’s outstanding shares shows the total number of shares issued and are held by shareholders. Executive directors might have a stock option that allow conversion to stock, but these kinds of stock benefits (restricted shares see below) are not included in the outstanding shares until fully issued.

Investors that seek to find out the number of outstanding shares will usually look at the balance sheet even though there are many ways to find out. Looking at the balance sheet where it says shareholders’ equity will typically show the total authorized shares, the total outstanding shares and the float shares.

Another way to calculate it is by getting the market capitalization of the day and divide it by its share price.

The floating shares do no take into consideration the closely held shares (see below). Indices like S&P 500 use the floating shares of a company as the basis for market capitalization.

How to calculate free-floating shares

Free-float = Outstanding shares – Restricted Shares – Closely-held shares

Outstanding shares are the shares that are held by all the shareholders in the company
Restricted Shares refer to the shares that cannot be transferred and are usually held by executive directors.
Closely-held shares are typically held for a long time.

Real world Example of Free float

Let’s get Tilray (NASDAQ: TLRY) as an example. Tilray is a cannabis company that went IPO in 2018, making it the first cannabis company to be listed on the NASDAQ. In January 2019 the stock was traded at $100 a similar nowadays example of GameStop (GME) that was short squeezed.

However, in 2018 the stock price raised dramatically at the point where the asset was halted five times. When this happened, the stock jumped 90% and closed the day on a 38% increase.

What caused Tilray’s stock price volatility?

Small number of free-floating shares. The stock has a public flat volume of 17.83 million shares and a resulting of 23% free-float percentage. In other words, this is a very small number of floating shares compared to its peers. Due the small number of shares available to the public for trading and a high short interest on the stock, the extreme volatility gave boost to its price.

Free-float percentage

Free Float Percentage = Free float / Shares Outstanding

This percentage represents the shares outstanding freely for trade.

Increase / Decrease of the Free float volume

A company may choose to decrease or increase its outstanding shares, this is usually a decision made by the management of the company. A company that chooses to decrease its free-floating shares can do so by share buybacks or a reverse stock split. On the other hand, a company might choose to increase its free-floating shares through a secondary offering or a stock split.

This one of our recent reddit post regarding the new trend going around that has much to do with free-floating shares.

The Pump and Dump is the new trend. It is also the #1 reason why new day traders lose money.

All you need to do is understand how to play. How can I make money from the pump before the dump?

Free-floating shares MUSTbe smaller than avg – you can find free-floating shares data here :
https://www.lowfloat.com/ and compare to avg floating shares that are rallying.
Scan volume for upticks of unusual amounts – if you see a multiplier of over 4 – you will find action there.
If the stock is already above 30% in PRE MARKET (!)expect more action to come BUT let the convergence period take place meaning the stock will jump pre-market and then move “sideways” for a period of several hours and towards the last 2H of the market the rally will continue.
LET THE STOCK CORRECT FIRST !!! Don’t FOMO in the trade – you must see a correction – doesn’t matter how many bulls are involved. Price areas need to be tested again so wait for a pullback and see the formation of candles (spot a Doji or bottoming tail) and see orders flow. Stocks will have selling order waves that are waiting on a new price target. So if stock jumped to a new high expect orders to go out there and that’s the pullback you may get for better entry – FOMO will kill you! Count to 10 before opening the trade – basic but most of you do it wrong at this point.
“It’s never too late” – NOT TRUE– if stock is up 200% double-check yourself. Yes, it can go 1000% but that’s once in a full moon, don’t think this happens every day. 200% means the dump of the pump and dump is coming and you will be left holding the bag!
POC – point of control – see what price the order flow is struggling to pass. On AACG it was 14.5 and 17- these areas had a lot of sell orders just waiting to be executed. Don’t enter at POC levels – if you see a sideways /fall out/small body candles /long wicks this may be it
Remember the golden rule – institutions see things you don’t! They have a depth order flow and they can see those areas much earlier than us NOT TO MENTION BOTS !!!! Bots see it all -one of the biggest hedge funds in the world –Renaissance Technologies– is handled by bots and has a turnover of billions per day – don’t fight them follow them – bots will usually execute orders buy/sell at round and half-round numbers -so keep your eyes on these pivot points
OR JOIN OUR GROUP and forget the above (also an option) !! We do everything for you.

Read other terms such as Technical Analysis or Detrended price oscillator (DPO) !!