What does the term “float” indicate in relation to an IPO?

The term "float" in relation to an IPO specifically refers to the number of shares that are available for public trading after the company goes public. This is an important concept because the float determines how much of the company's stock is available to investors on the open market, influencing liquidity and market dynamics. A larger float generally increases the volume of trading and can lead to more stable price movements, while a smaller float can result in more volatility.

Insiders, including executives and employees, often hold a significant portion of the company's shares initially, which are not considered part of the float. The capital raised during the IPO pertains to the overall proceeds but does not reflect the actual number of shares that can be traded by the public. Additionally, the actual number of shares sold during the IPO reflects the transaction details but does not capture the essential aspect of how many shares can subsequently be traded without being under a lockup or restriction period.