Free-Float Market Capitalisation
Free-float market capitalisation is the value of only the shares a company has available for public trading — its total market value minus shares locked up by founders, governments, and strategic holders.
Free-float market capitalisation measures a company's size using only the shares that are actually available to trade on the open market. It starts from total market capitalisation — share price multiplied by all shares outstanding — and strips out the shares that are not realistically for sale: stakes held by founders and their families, government holdings, and strategic investors who hold for the long term.
Total market cap vs free float
The two numbers can be very different. Consider a company whose shares trade at PKR 100, with 1 billion shares outstanding — a total market cap of PKR 100 billion. If founders and the government hold 60% of those shares and never trade them, only 40% is free float:
| Measure | Calculation | Value (PKR bn) |
|---|---|---|
| Total market cap | PKR 100 × 1,000m shares | 100 |
| Locked-up holdings | 60% of shares | 60 |
| Free-float market cap | 40% of shares | 40 |
Why the PSX uses free float to weight indices
Indices like the KSE-100 weight each company by its free-float market cap rather than its total market cap. The reason is practical: an index is meant to reflect what investors can actually buy. If a company's shares are mostly locked away, its real influence on tradeable market value is smaller than its headline size suggests — so it should move the index less. Free-float weighting prevents a company with a tiny public float from dominating the benchmark just because its paper value is large.
Why this matters for your strategy
When you backtest a strategy against an index universe on PSX Algos, the companies that drive most of the index's movement are the large free-float names. Understanding which stocks carry the most weight helps you read why a backtest behaved the way it did.
Build a strategy →Frequently asked
What is free-float market capitalisation in simple terms?
It is the market value of only the shares a company has available for public trading. It excludes shares held by founders, governments, and strategic investors that are not realistically available to buy.
How is free-float market cap different from market cap?
Total market cap counts every share outstanding, while free-float market cap counts only the publicly tradeable shares. A company with large locked-up holdings will have a much smaller free float than its total market cap.
Why does the KSE-100 use free-float weighting?
Because an index should reflect what investors can actually trade. Free-float weighting stops a company with a small public float from dominating the index purely on paper value.