Free Float Shares: Definition, Impact, and Regulations According to the IDX

Bittime - In the world of stock investing, the term free float saham often appears when discussing the liquidity and price stability of a share. 

For investors who want to understand price movements more accurately, understanding the concept of free float is an important step. 

This article will comprehensively review the definition, impact, and regulations of free float saham in Indonesia.

What is Free Float Stock?

Free float saham is the number of a company's shares that are circulating in the market and can be freely traded by the public. 

These shares do not include shares owned by major shareholders, management, or parties directly affiliated with the company.

In other words, free float describes how large a portion of the shares is available for trading on the secondary market. The larger the free float, the more active the stock's movement on the exchange.

For example, a company with 1 billion shares outstanding, where 200 million shares are owned by the public and the rest are held by management, means the free float is 20%. 

This percentage becomes an important indicator for investors and the Indonesia Stock Exchange (BEI) in assessing a stock's liquidity.

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Dampak Free Float di Pasar Saham

The concept of free float is not only a statistical figure but also plays an important role in a stock's stability and attractiveness in the market. Here are some of the main impacts:

1. Increases Liquidity

Stocks with high free float have better liquidity. Investors can buy or sell the stock easily without causing sharp price changes. 

This is important for traders who actively conduct short-term transactions.

2. Reduces Volatility

Stocks with low free float are usually more volatile because a small number of transactions can trigger large price movements. 

Conversely, free float that is high tends to stabilize prices because higher trading volumes allow the market to absorb changes more efficiently.

3. Better Price Efficiency

With more shares circulating among the public, stock prices tend to better reflect true (fair value). 

This is because market information is absorbed more easily and investor participation increases.

4. Reduces the Influence of Large Shareholders

A high free float reduces the ability of large investors to influence the stock price, avoiding potential price manipulation or unhealthy market intervention.

5. Increases Access to Capital

Companies with a large free float have greater flexibility to conduct an initial public offering (IPO) or additional share offerings. 

This is because investor interest in liquid stocks is generally higher.

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Regulations Free Float Stock Based on BEI

The Indonesia Stock Exchange (BEI) has set minimum free float requirements to maintain market transparency and liquidity. 

Based on regulations effective since 2021, the free float requirements are as follows:

• The minimum number of free float shares is 50 million shares or 7.5% of total listed shares.
   

• Issuers must have at least 300 public shareholders (including SID holders).
   

• If a company fails to meet these requirements within 24 months, BEI has the right to impose a IDR 50 million fine and additional administrative sanctions.
   

These rules aim to improve the efficiency and credibility of Indonesia's capital market in line with global practices.

Pentingnya Free Float bagi Investor

For investors, knowing a stock's free float ratio can help in crafting investment strategies. 

Stocks with low free float are often easier to manipulate and carry higher risk. Conversely, stocks with high free float tend to be more stable and suitable for long-term investment.

Investors should also note that an increase in free float through new share sales or large shareholders reducing holdings can be a positive signal, indicating improved liquidity.

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Conclusion

Free float stock is an important indicator in assessing the liquidity and price stability of a stock in the market. The higher the free float, the healthier the stock's movement on the exchange. 

By understanding this concept, investors can make wiser decisions for both short-term and long-term investments.

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FAQ

Apa itu free float stock?

Free float stock is the number of shares that are outstanding and tradable by the public on the exchange, excluding shares owned by management or major shareholders.

Why is free float important for investors?

Because free float determines a stock's liquidity, affects price volatility, and reflects how efficiently the market values a stock.

What is the minimum free float in Indonesia?

According to BEI, at least 50 million shares or 7.5% of total shares must be owned by the public, with a minimum of 300 shareholders.

What happens if a company fails to meet the free float requirement?

BEI will impose a fine of IDR 50 million and administrative sanctions if the company fails to meet the free float requirement for 24 months.