A company’s free float refers to the percentage of shares that are available for public trading on the stock exchange.
It excludes shares held by:
Founders
Promoters
Governments
Strategic investors
Directors/management
Locked-in institutional holders
The basic formula is:
Free Float % = publicly traded shares÷Total Outstanding shares ×100
How to Determine if Free Float is Low or High
1. Check the Free Float Percentage
You can usually find this in:
Annual reports
NGX filings
Broker research reports
Stock data platforms like ngxgroup.com,investing.com, or tradingview.com
General Interpretation
Free Float
Meaning
Below 15%
Very low float
15%–30%
Low to moderate
30%–50%
Healthy float
Above 50%
High float
These are not hard rules, but they are commonly used by investors.
What Low Free Float Means
A company with low free float has fewer shares available for buying and selling.
Effects:
Share price can move very sharply
Easier for big investors to influence price
Often more volatile
Can rise very fast during strong demand
Can also crash hard due to low liquidity
Example
Suppose a company has:
10 billion total shares
Founders own 8 billion
Only 2 billion trade publicly
Then:
2billion÷10Billion ×100=20%
That is a relatively low float.
What High Free Float Means
A high-float company has many shares actively available in the market.
Effects:
Easier to buy and sell
More stable price movement
Usually better liquidity
Harder to manipulate
Large institutional investors prefer them
Banks and mature blue-chip companies often have higher floats.
Why Investors Watch Free Float
Free float affects:
Liquidity
Volatility
Ease of entering/exiting positions
Inclusion in stock indices
Institutional interest
For example, the Nigerian Exchange Group uses free float requirements for some index calculations.
Practical Signs of Low Float Stocks
Even without exact data, you can suspect low float when:
Daily trading volume is tiny
Bid/ask spread is wide
Price jumps aggressively on little news
Few shareholders control most shares
Stock frequently hits upper/lower price limits
In Nigerian Stocks Specifically
Many Nigerian companies historically have:
Strong insider ownership
Family-controlled structures
Strategic shareholders holding large blocks
This can reduce free float significantly even when the company is large.
A stock can have:
Huge market capitalization
But still low effective tradable supply
That combination sometimes creates explosive rallies when demand suddenly increases.
What Smart Investors Usually Prefer
Long-term conservative investors:
Often prefer:
Moderate to high float
Better liquidity
Easier exits
Aggressive traders/speculators:
Sometimes target:
Low float stocks
Because prices can surge rapidly
But risk is much higher.
One Important Distinction
A company may have:
High number of shares outstanding BUT
Low free float
Those are different concepts.
Many beginners confuse:
“Many shares exist” with
“Many shares are actually tradable”
They are not the same thing.