Calculate Public Float

Introduction

Understanding how to calculate public float is crucial for investors and financial analysts aiming to assess a company's market availability. Public float refers to the number of shares available for trading by the general public, excluding locked-in shares owned by insiders and major shareholders. This calculation helps in determining the liquidity of stocks, which is essential for making informed investment decisions.

This guide will provide you with a clear and concise method to calculate the public float. Additionally, we'll explore how Sourcetable can simplify this process using its AI-powered spreadsheet assistant, enhancing your financial analysis capabilities. Experience it firsthand at app.sourcetable.com/signup.

How to Calculate Public Float

Calculating the public float of a company involves determining the number of shares available for trading by public investors. This measure excludes shares held by insiders and affiliates, offering a clear picture of market liquidity. The computation is both straightforward and crucial for regulatory compliance and market analysis.

Essential Components for Calculation

The primary components needed to calculate public float are the aggregate number of outstanding shares held by non-affiliates and the current sale price of these shares. Ensure that these figures are up-to-date and reflect the scenario at the applicable date, typically the last business day of the issuer's second fiscal quarter.

Steps to Calculate Public Float

To compute the public float, use the formula: Public Float = (sale price of common stock on the applicable date) X (the number of aggregate worldwide outstanding shares held by non-affiliates of the issuer). This calculation should not include shares held by executive officers, directors, or any shareholders considered affiliates. Moreover, derivative securities must also be excluded from this calculation.

Regulatory Considerations

For registrants with a public float of less than $75 million, special attention must be paid to the limitations on selling securities under a Form S-3. These restrictions allow for the sales of securities valued up to one-third of the public float over any 12-month period. This regulatory requirement underlines the importance of an accurate public float calculation.

This focused approach to public float ensures compliance and allows companies to understand and communicate their market position effectively. Correct calculations support sound financial strategies and compliance with securities regulations.

How to Calculate Public Float

Understanding Public Float

Public float represents the dollar value of a company's shares that are available for trading by the general public. It is a significant indicator used in the financial market to assess company size and market liquidity. Public float is calculated as the product of the number of shares held by non-affiliates and the current market price of the shares.

Step-by-Step Calculation

To accurately calculate public float, follow these main steps: First, determine the number of shares held by non-affiliates by subtracting any shares held by affiliates, such as executive officers, directors, and other insider stakeholders, from the total outstanding shares. Next, identify the current sale price of the stock on the applicable date—usually the last business day of the company's second fiscal quarter.

Combine these figures using the formula: Public Float = Sale Price of Common Stock × Number of Non-Affiliate Shares.

Important Considerations

When calculating public float, exclude any shares held by affiliates and derivative securities such as options, warrants, and restricted stock units, which can skew the understanding of freely available shares. Also, treasury shares should be omitted from the calculation as they represent stock that the company has repurchased and does not intend to reissue.

Practical Example

If a company has 1 million shares available to non-affiliates and the current stock price is $10, the public float is calculated as $10 million, derived from multiplying the non-affiliate share count by the sale price of the stock.

Calculating Public Float: Practical Examples

Example 1: Technology Company

To calculate the public float of a technology company with 10 million shares outstanding and insiders own 3 million shares, subtract the insider-owned shares from the total outstanding shares. This gives a public float of 10,000,000 - 3,000,000 = 7,000,000 shares.

Example 2: Manufacturing Firm

A manufacturing firm has issued 15 million shares. Employee stock options account for 2 million shares. The calculation for public float is straightforward: 15,000,000 - 2,000,000 = 13,000,000 shares available for public trade.

Example 3: Retail Corporation

For a retail corporation with 22 million shares outstanding, where institutional investors hold 10 million shares and insiders hold 2 million, the public float is calculated by subtracting both institutional and insider holdings from the total shares: 22,000,000 - (10,000,000 + 2,000,000) = 10,000,000 shares on the market.

Example 4: Biotech Start-Up

A biotech start-up has 5 million shares outstanding. As it's a new company, assume insider shares are relatively high, at 3 million. Here, the public float would be 5,000,000 - 3,000,000 = 2,000,000 shares, indicating limited public availability.

Example 5: E-commerce Platform

An e-commerce platform listed 50 million shares. Directors and large stakeholders possess 20 million shares. Thus, the public float is 50,000,000 - 20,000,000 = 30,000,000 shares, reflecting a relatively large public market presence.

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Example: Calculating Public Float

When asked how to calculate public float, Sourcetable's AI simplifies the process. Public float can be calculated with the formula Public Float = Total Shares - Restricted Shares, where "Total Shares" are the shares issued by a company and "Restricted Shares" are shares that are not available for public trading. Sourcetable automates these calculations, ensuring quick and error-free results.

Conclusion

Understanding how to calculate public float is crucial for investors and financial analysts alike. This value, calculated as the number of shares offered to the public minus any restricted stock, showcases a company's market liquidity. Typically formulated as Public\ Float = Outstanding\ Shares - Restricted\ Shares, accurately computing this figure is vital for market analysis and investing strategies.

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