
The Float Ratio of a stock refers to the number of outstanding shares held by “public investors” as opposed to company officers, directors, controlling-interest investors or other strategic investors. In essence, the float ratio refers to the proportion of shares that are available for regular trading, as distinct from shareholdings that are only likely to be traded as part of a major re-organization of the firm. The float ratio is a major determinant of the liquidity of a stock. Stocks with relatively small float ratios tend be rather illiquid, with very little trading. This makes it extremely difficult for investors to earn capital gains on such investments, and may leave minority investors at the mercy of the dividend policy set by dominant shareholders. To help promote liquid markets, the Hong Kong Stock exchange, for example, requires a minimum float of 25% of the outstanding shares. In a number of cases, stocks listed on Caricom exchanges have float ratios way below this minimum.





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