Float ownership

dmarkham

My question regards the Company float. If institutions and mutual funds can own more than 100 percent of the float, would they not totally control the sale of the stock? I have found instances where institutions and mutual funds owned more than 100 percent. In that instance do they own part of the cap? Probably doesn't matter but I am just curious.

markd

I don't think you can tell who is trading. You might be able to piece it together after the fact from SEC filings (good luck with that. But Gatis Roze uses these to figure out what Fidelity is doing - see his blog archive). Still, it's highly unlikely a fund would dump its entire holding in one day - normally that would just crater the price. I think the standard practice is to acquire or reduce positions as gradually as possible so as not to attract attention. My guess is there was "surprise" news (as opposed to news that the well informed are already aware of) that caused lots of holders to sell - and maybe some major ones. The gap might be due to overnight trading, or, if the stock is handled by a specialist, it would be due to the specialist's judgement of where the balance of buy and sell orders can be made to open trading. Actually, if you study prices carefully, it's unusual that bad news (or good news) is not telegraphed ahead of time - but that's another topic.

Kevo

I am confused on what you mean by owning more than 100 percent of float?

I just checked this: by definition float is what is available to the public. Float is calculated by subtracting "outstanding shares", which I believe means publicly owned, from locked-in shares. I am guessing that Mutual Funds own from the "Outstanding Shares" pool? If Mutual Funds own from the Outstanding Shares pool, then are they excluded from the float calculation?

Can someone verify this: Float is all shares issued minus locked-in shares minus outstanding shares?

Are there two calculations of float? One that includes outstanding shares, and one that does not?

Kevo

I worked on this topic some. Hopefully this information is accurate. Once you become familiar with a few details, it should start to make sense.

Here are a few definitions to start with.

Outstanding Shares: All the shares of a company that has been authorized and issued. These shares have been purchased by investors. These investors have rights and represent ownership of the company.

Locked-In Shares: Of the outstanding shares, these shares are held by employees and governments. Locked-in shares could also be held by promoters, and controlling interest investors.

Restricted Shares: Likely a subset of locked-in shares. These are typically owned by employees who cannot exercise them yet.

Float: is the number of company shares that are available for trading by the general public on the open market. Float is usually a percentage of outstanding shares like 37%, for example. Float excludes shares that are not available for trading, namely Locked-In shares. Float tends to increase over time as more shares become available to the general public.

Float Calculation: subtract Locked-In shares from Outstanding shares.

Free-Float: is a method of calculating Market Capitalization meaning that Market Cap is determined by using float x share price; not outstanding shares x share price.

To answer the question, if Institutions and/or Mutual Funds own more than 100% of the float, then this likely means that these Institutions own Locked-In shares because they are likely "Controlling Interest Investors". This means their shares are not included in the float.

This could imply that if Institutions do own more Locked-In shares than float, then this could mean there is less float available for trading. Stocks with smaller floats are more volatile because of limited liquidity, and a wider bid-ask spread.

To answer the second question, the Locked-In shares that these Institutions own are excluded from counting toward the Market Cap since Market Cap is calculated using Free-Float.

dmarkham

Thanks but not my question. I understand float. What I want to know is float ownership as listed on Yahoo money markets. If you look at Best Buy (BBY), Major Holders, you will see the following information. Breakdown
% of Shares Held by All Insider and 5% Owners: 21%
% of Shares Held by Institutional & Mutual Fund Owners: 75%
% of Float Held by Institutional & Mutual Fund Owners: 94%
Number of Institutions Holding Shares: 418
In this instance it appears that Mutual Fund Owners and Institutions hold nearly all of the Float. If that is true.d is that not control of the trading shares of a company?

markd

Not sure what you are getting at. What do you mean by "control"? If you mean I&MFs do most of the trading, I think that's correct. But there are 418 of them. It seems unlikely you could get them to agree on anything. Also, mutual funds are partly constrained by the need to put money to work (buy when they might rather not) or satisfy redemptions (sell when they might rather not), so in some markets at least, even the possibility of control is not there. Also, they have to buy from and sell to mostly other I&MFs, so they can't all be on the same side at once.

dmarkham

Public float or free float represents the portion of shares of a corporation that are in the hands of public investors as opposed to ...This from Wikipedia. I used control the statement in Yahoo is Held. The above says in the hands of. so I see what you are saying and concur. You have helped me take the right look. If Vanguard holds 7%, that amounts to about 20 million shares, give or take. "Wow". tell me what you think about the following: on Aug 26, after a gap (after hours trading?), the market opened at $30.52
the Previous Close was $31.99 and the volume of the total trade on the 26th was 28,737,100. Throw in a few traders after opening traders like me and you probably have a Whale trade of about 10% of the Float . Possibly Vanguard? Normal seems to average around 3 to 7 million.

dmarkham

I thank you for your knowledge. I am a little more skeptical than you. News can do it but you and I can't make a candle like that and we can't cause a 2 point gap down or up because of our trading restrictions..