Free float

Definition

Free float refers to the proportion of a listed company's share capital actually available for trading on the open market. It is obtained by deducting from total capital the shares held on a stable basis and not intended to be traded in the short term: holdings of founding or controlling shareholders, blocks held by the State or public entities, treasury shares or self-held shares, cross-holdings between companies of the same group, and shares subject to a lock-up undertaking. Free float is generally expressed as a percentage of total capital or of the total number of shares issued.

Framework in Mauritius

In Mauritius, equity and bond markets are operated by the Stock Exchange of Mauritius (SEM), while the Financial Services Commission (FSC) supervises the non-bank financial services sector, which includes market activities. The SEM's listing and continuing-listing rules include, among their eligibility conditions, a minimum free float level specific to each market segment; this threshold depends on the listing segment concerned and must be verified directly with the SEM or a licensed professional, case by case, for any IPO or continued listing.

In practice

Free float serves as a reference for several common purposes: it determines a company's eligibility for certain stock market indices, which often use a weighting calculated on free-float capitalisation alone rather than on total capitalisation; it is also a liquidity indicator for investors, a low float generally translating into wider bid-ask spreads and more difficult order execution. For an executive or reference shareholder considering a listing on the SEM, as for an investor assessing a Mauritian security, it is important to distinguish free float from total capital held and to verify, as applicable, the eligibility and continuing-listing conditions applicable to the segment concerned with the SEM or a professional licensed by the FSC. These conditions, like the practical arrangements for a market transaction, can only be confirmed case by case and are never guaranteed in advance.

Related terms

The Stock Exchange of Mauritius (SEM) is the operator of the equity and bond markets on which a listed Mauritian company's free float is traded.

The Financial Services Commission (FSC) is the regulator of non-bank financial services in Mauritius, responsible for overseeing market activities.

Related terms