Market capitalisation and free float: two different sizes of the same company
beginner
Automated material · TradeAlmanac editorial deskDraft prepared by a language model from our stored data; not reviewed by an editor.
Capitalisation is the share price multiplied by the number of shares. A clear figure that, taken on its own, misleads.
What free float is
The share of stock in free circulation: not held by the state, not by a controlling shareholder, not sitting in treasury. Only those shares genuinely take part in trading.
A company with a large capitalisation and a small free float can have a modest daily turnover. For an investor the second number matters more.
{{figure:market-cap|caption=Capitalisation is the price of a share times how many exist; it says nothing about how many of them trade}}
Where it shows up
In index weights: they are computed from capitalisation adjusted for free float, not from the full figure — The MOEX Russia Index: what it measures.
In volatility: with little stock in circulation, a relatively modest order moves the price noticeably.
In governance: with a controlling shareholder in place, a minority holder influences nothing, and decisions are taken in their absence.
What changes the free float
A new share issue increases the share count and usually the free float too — A new share issue: why it hits existing owners. A buyback reduces both — Buybacks: the quieter alternative to a dividend.
How to use it
Size a planned position against daily turnover, not against capitalisation. The size of a company guarantees nothing about your ability to get out.
Related instruments
Draft prepared by a language model from our stored data; not reviewed by an editor.
Model: claude-opus-5
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