In finance, what does "float" refer to?

Float refers specifically to the number of shares of a company's stock that are available for trading in the open market. This includes shares that are not held by insiders, such as executives or employees who are subject to lock-up agreements. Float is important because it gives investors an idea of how easily a stock can be bought or sold in the market without significantly impacting its price. A higher float typically indicates more liquidity, making it easier for traders to execute larger transactions without causing price volatility.

In contrast, the total market capitalization of a company involves the entire value of all outstanding shares, which includes both the float and insider-held shares. The total number of shares owned by insiders and the number of shares held by institutional investors provide insights into ownership structure and can influence stock price behavior, but they do not define the float itself. Therefore, understanding float is crucial for evaluating a stock's liquidity and trading dynamics.