But, the only thing you need to get started is knowledge of the basics. And one of those is the investments you yourself will be making.
The most popular form of investment in the market are stocks or company shares. When looking to purchase one, you may encounter phrases like “low float stock” and “shares outstanding.” Then you’ll ask yourself, what’s the difference between outstanding shares vs float?
Luckily, you’re in the right place.
We’re here to help you differentiate outstanding shares vs float and teach you so much more!
What is Shares Outstanding?
Starting off with the general idea before talking about the difference between outstanding shares vs float.
Think about a company you want to invest in. Do you want to be a shareholder of Apple? Of Google? These sound like a dream, don’t they?
Now, take this company and visualize its ownership. Although the company may have a founder, big companies that have entered the market are owned by several to various people.
These are called shares or stocks. There are two kinds of shares, the restricted and closely held and the floating ones.
And the total number of shares a company has is what we call shares outstanding.
What is a Floating Stock?
As we said a few sentences back, floating stocks are one of the two things that make up the shares outstanding of a company.
These are company shares that are put in the public trading market for investors to buy and sell.
Now, these shares are either high-float or low-float. It honestly depends on the condition of the market.
High float stocks mean that there are numerous company shares in the market; these are best for long-term investments. On the other hand, low-float stocks exist when there are barely any shares of the company for sale, ideal for short-term investments.
Shares Outstanding vs. Floating Stock Example
Now, we understand that newbie traders may still be confused over the difference between shares outstanding and float. After all, we haven’t really explained it so much.
Allow us to expound on the idea by providing you with an example.
Think about one of the companies you’re planning to invest in again.
Now, let’s say that company has 7 billion floating shares either in the market or owned by investors. And about 3 billion restricted and closely held shares owned by the executives, directors, and founder/s of the company.
Remember how earlier we explained that a company’s shares outstanding is made up of both the floating shares and the restricted and closely held shares?
That only means that if you add both of these types of shares, you’ll get the company’s shares outstanding.
So, 7 billion floating shares plus 3 billion restricted and closely held shares sum up to 10 billion shares outstanding.
Is Shares Outstanding the Same as Float?
No.
Although these two things are very much related to each other, they are not the same.
When asked, “what is shares outstanding vs float?” we commonly talk about how one makes up the other.
However, the main difference between the two is their scope.
Floating stocks are shares of the company that are available for public trading in the market. And shares outstanding is the total number of shares a company owns.
So, when differing public float vs shares outstanding, always remember that public floats are part of the shares outstanding. Again, one makes up the other.
Can Float be Higher than Shares Outstanding?
Also no.
Not only is it very unlikely, but there is absolutely no possibility of this happening.
Remember earlier when we were differing free float vs shares outstanding? We highlighted the fact that floats make up the shares outstanding of the company.
So, floating stocks are basically like a country, and the shares outstanding is the continent it belongs to.
Which, again, makes it impossible for the float to be higher than the shares outstanding itself.
We hope we’ve cleared up your confusion between outstanding shares vs float. And if you ever find yourself perplexed over them again, you can always come back here and have another read.
