Public float

Under free float ( English. " free float" ) is meant for public companies, the sum of the shares that are available to the stock market trading.

General

Ideally, 100 % of the shares of a public company traded on the stock exchange. If the proportion of the publicly traded shares below 100%, so there is the non-quoted part as " share package " owned by major investors. In the U.S., the majority of shares belongs to the free float, while located in free float in Germany 1988-2000 the share of majority (> 50 %) company has rather tended to decrease at the 100 largest public companies. Frequently there are, however, both nationally and internationally larger blocks of shares of a corporation owned by individual major shareholders and are not the stock market trading. The for exchange trading this remaining residual is then called free float. He is the percentage value of publicly traded shares held.

Public companies in free float have the following characteristics:

• Goal of continuous enhancement of shareholder value,
• Shift in power relations to the Manager,
• Redistribution of profits to shareholders and management.

Companies in free float usually have no long-term shareholders, but a partner who can doubt have a very short-term interest in the company ( profit-taking ). Major shareholders, however, usually pursue strategic and long -term goals with their participation.

Legal questions for free float

Shares with a lock-up of at least 6 months, not part of the free float; Lock up is an agreement with a shareholder, that he can not sell the shares for a certain period. The free float may result in terms of the right to vote at general meetings of atomization voting shares while large majorities of shares by influencing important decisions by single vote and may appoint Supervisory Board members.

The German Börse AG has changed its index calculation on a free float weighting in June 2002. The determination of the free float ( free float ) for the weighting of each class of shares of a company in the indices is based on a free float definition, according to which all shares of a shareholder, which account for a cumulative minimum of 5% of net income attributable to a class of share capital of a company shall be regarded as non-free float. Shareholdings of an even shares held by the family ( § 15a WpHG) the shareholder shall apply. Thus, the values ​​in the equity indices of trading volume and market capitalization are based on the free float weighted ( free float market capitalization ). A qualitative feature for shares of the selection indices of Deutsche Börse AG is therefore beside the continuous trading in Xetra trading system of the Frankfurt Stock Exchange and the minimum free float rate of 5 %. In June 2013, the German stock market presented a differentiated definition of the term.

In other countries, there are different views, which are mostly determined by the respective securities laws. So decide in the United States the weekly trading volume over the reporting obligation under Article 144 of the Securities Act of 1933. Therefore considered by many custodians as reported transactions, which account for often less than 3% of the total number of shares, no longer expected to float, so that there will be differing information relating to Deutsche Börse.

Achieved the free float on the squeeze -out threshold of 5 %, these minority shareholders may be excluded pursuant to § 327a paragraph 1 sentence 1 AktG by the majority shareholder in exchange for appropriate compensation.

Free float and market price

Economists have examined the relationship between free float and market price. The higher the free float for a particular stock goes down, the " wider " the market is, the lower the free float, the greater is the market cornered. The tradability ( " liquidity " ) of a share increases with increasing free float. With extensive free float can be assumed that there is a herd mentality unlearned shareholders in consonant reporting. Company with only a small free float may be less susceptible to trends that analysts and media reports triggered or enhanced. However, a low free float have the consequence that price-sensitive information have a much greater impact on the share price. The volatility of a stock rises if their free float ratio is small because few transactions may have a relatively large impact on the price on the stock exchange. Conversely, in addition to values ​​with a high free float greater price vulnerability conceivable.

A tight market is affirmed by the courts only in exceptional cases. The market price only does not reflect the market value, if at least 95 % of the shares can not be sold and took place over a considerable period no trading in these shares. With a free float of 0.45 % and a traded quantity of 7.6 % of the free float, the OLG Munich saw no market cornered. Economically, there is a narrow market, when a comparatively marginal buy or sell orders greater price fluctuations are triggered. The market tightness increases shareholders the opportunity to sell their shares at a fair market price.