Term · Market & Classification
Free-Float Market Capitalization
In briefFree-float market capitalization captures only the freely tradable portion of shares. It reflects the practically tradable size of a small cap more realistically than total market capitalization.
Definition
Market capitalization calculated on the basis of the freely tradable portion only.
How it is calculated
Formula. Free-float market cap = share price × free-float portion of shares.
Why it matters for small caps
A more realistic measure of the actually tradable size of a small cap than total market capitalization.
Common misreadings
- It is confused with total market capitalization, even though with a low free float the two values can diverge strongly.
In the process
Frequently asked
What is free-float market capitalization?
It values only the shares in free float that are freely traded. Tightly held stakes are left out.
What is the free-float figure used for?
It shows what portion of a company is actually available on the market. For liquidity and index weighting, this is often more relevant than the total size.
Why must free-float and total market capitalization not be confused?
With a low free float, the two values diverge strongly. Anyone using the total size significantly overestimates the tradable amount.
Related terms
Sources
Primary
STOXX – Guide to the DAX Equity Indices
https://www.dax-indices.com/document/Resources/Guides/DAX\_Equity\_Indices.pdf
https://www.dax-indices.com/document/Resources/Guides/DAX\_Equity\_Indices.pdf
Methodology
MSCI – Small Cap Indexes
https://www.msci.com/indexes/group/small-cap-indexes
https://www.msci.com/indexes/group/small-cap-indexes
Education only, not investment advice. Ranges and thresholds are didactic orientation values, not an official standard.