The New York Stock Exchange on Wall Street, the world's largest stock exchange in terms of total market capitalization of its listed companies, as of 2010[1]

Market capitalization, sometimes referred to as market cap, is the total value of a publicly traded company's outstanding common shares owned by stockholders.[2]

Market capitalization is equal to the market price per common share multiplied by the number of common shares outstanding.[2][3][4]

Description

Market capitalization is sometimes used to rank the size of companies. It measures only the equity component of a company's capital structure, and does not reflect management's decision as to how much debt (or leverage) is used to finance the firm. A more comprehensive measure of a firm's size is enterprise value (EV), which gives effect to outstanding debt, preferred stock, and other factors. For insurance firms, a value called the embedded value (EV) has been used.

It is also used in ranking the relative size of stock exchanges, being a measure of the sum of the market capitalizations of all companies listed on each stock exchange. The total capitalization of stock markets or economic regions may be compared with other economic indicators (e.g. the Buffett indicator). The total market capitalization of all publicly traded companies in 2023 was approximately US$111 trillion.[5] The total market capitalization of all publicly traded companies as of February 2025 is approximately US$124 trillion. [1]

Historical estimates of world market cap

Total market capitalization of all publicly traded companies in the world from 1975 to 2020.[6]

Year World market cap
(in mil. US$) 		World market cap
(% of GDP) 		Number of listed
companies
1975 1,149,245 27.2 14,577
1980 2,525,736 29.6 17,273
1985 4,684,978 47.0 20,555
1990 9,519,107 50.8 23,732
1991 11,340,785 56.8 24,666
1992 10,819,256 50.2 24,947
1993 13,897,390 61.7 28,300
1994 14,639,924 60.9 30,290
1995 17,263,728 64.0 33,379
1996 19,806,691 72.3 35,617
1997 22,029,761 80.7 36,946
1998 24,555,201 89.6 37,928
1999 33,181,159 115.1 38,414
2000 30,925,434 101.1 39,892
2001 26,792,162 88.4 40,157
2002 22,802,792 72.7 38,894
2003 31,107,425 84.9 41,051
2004 36,540,980 89.2 38,724
2005 40,512,446 92.6 39,096
2006 50,074,966 106.1 43,104
2007 60,456,082 114.0 44,034
2008 32,418,516 56.2 43,949
2009 47,471,293 83.8 42,669
2010 54,259,518 87.3 43,427
2011 47,521,341 68.8 44,323
2012 54,503,237 78.4 43,772
2013 64,367,842 89.0 44,853
2014 67,177,254 90.3 45,743
2015 62,268,184 94.5 43,983
2016 65,117,714 97.1 43,806
2017 79,501,948 111.1 43,440
2018 68,893,044 91.9 43,554
2019 78,825,583 108.4 43,248
2020 93,686,226 134.7 49,839
2021 111,159,259 131.8 51,337
2022 93,688,922 106.2 47,926

Calculation

Market cap is given by the formula , where MC is the market capitalization, N is the number of common shares outstanding, and P is the market price per common share.[2]

For example, if a company has 4 million common shares outstanding and the closing price per share is $20, its market capitalization is then $80 million. If the closing price per share rises to $21, the market cap becomes $84 million. If it drops to $19 per share, the market cap falls to $76 million. This is in contrast to mercantile pricing where purchase price, average price and sale price may differ due to transaction costs.

Not all of the outstanding shares trade on the open market. The number of shares trading on the open market is called the float. It is equal to or less than N because N includes shares that are restricted from trading. The free-float market cap uses just the floating number of shares in the calculation, generally resulting in a smaller number.

Market cap terms

Traditionally, companies were divided into large-cap, mid-cap, and small-cap.[7][3] The terms mega-cap and micro-cap have since come into common use,[8][9] and nano-cap is sometimes heard. Large caps have a slow growth rate as compared to small caps. [2] Different numbers are used by different indexes;[10] there is no official definition of, or full consensus agreement about, the exact cutoff values. The cutoffs may be defined as percentiles rather than in nominal dollars. The definitions expressed in nominal dollars need to be adjusted over decades due to inflation, population change, and overall market valuation (for example, $1 billion was a large market cap in 1950, but it is not very large now), and market caps are likely to be different country to country.

In the United States

FINRA's investor education materials state that the following is a typical (not official) categorization of stocks by market capitalization:[11]

Market cap categories per FINRA in 2022[11]
Name of category Market capitalization of individual stock (FINRA, 2022) Market capitalization of individual stock (GDP deflator adjusted to 2023 USD)[12]
Mega-cap ≥ $200 billion ≥ $207 billion
Large-cap $10 billion – $200 billion $10 billion – $207 billion
Mid-cap $2 billion – $10 billion $2 billion – $10 billion
Small-cap $250 million – $2 billion $259 million – $2 billion
Micro-cap < $250 million < $259 million

The U.S. Securities and Exchange Commission notes that nano-cap stocks, in cases when they're separated from micro-caps, are typically defined as stocks with a market capitalization less than $50 million (as of 2013);[13] which is equivalent to less than $64 million in 2023.[12]

S&P Dow Jones Indices defines 3 major US indices segmented by market capitalization. The components of these indices are selected by committee, but in order to be eligible, among other requirements,[14] a stock's market capitalization at the time of addition must be within the respective range in the following table:

Market cap requirements for major S&P indices, as of 2025[15]
Index Category Market capitalization required for addition
S&P 500 Large-cap ≥ US$20.5 billion
S&P 400 Mid-cap $7.4 billion – $20.5 billion
S&P 600 Small-cap $1 billion – $7.4 billion

These market cap eligibility criteria are only for addition to these indices, not for continued membership in an index. As a result, an S&P index constituent that appears to violate criteria for addition to that index is not removed unless ongoing conditions warrant an index change.[15]

See also

References

  1. ^ "Market highlights for first half-year 2010" (PDF). World Federation of Exchanges. July 2010. Archived from the original (PDF) on July 22, 2013. Retrieved May 29, 2013.
  2. ^ a b c d Graham, John R; Smart, Scott B.; Megginson, William J. (2010). Corporate Finance (3rd ed.). Mason OH: South-Western Cengage Learning. p. 387. ISBN 9780324782967.
  3. ^ a b Fernando, Jason (March 5, 2024). "Market Capitalization: What It Means for Investors". Investopedia. Retrieved February 25, 2025.
  4. ^ "Definition of market capitalisation". Financial Times Lexicon. Financial Times. Archived from the original on September 25, 2016. Retrieved February 19, 2013.
  5. ^ "FY 2023 Market Highlights" (PDF). World Federation of Exchanges. March 8, 2024. Archived from the original on September 17, 2024. Retrieved September 17, 2024.
  6. ^ "Market capitalization of listed domestic companies (current US$) | Data". Data.WorldBank.org. Retrieved September 20, 2021.
  7. ^ Collin, Victoria (July 2, 2021). "Large Cap, Mid Cap, and Small Cap Stocks". Financial Edge. Retrieved February 25, 2025.
  8. ^ Chen, James (April 27, 2022). "Mega Cap: Companies With Market Caps Above $200 Billion". Investopedia. Retrieved February 25, 2025.
  9. ^ Chen, James (July 12, 2022). "Micro-Cap: Definition in Stock Investing, Risks Vs. Larger Caps". Investopedia. Retrieved February 25, 2025.
  10. ^ "What is Market Capitalization? definition and meaning". InvestorWords. WebFinance, Inc. 2020. Archived from the original on October 1, 2020. Retrieved August 3, 2008.
  11. ^ a b "Market Cap Explained". FINRA. September 30, 2022. Archived from the original on February 4, 2025. Retrieved February 25, 2025.
  12. ^ a b Johnston, Louis; Williamson, Samuel H. (2023). "What Was the U.S. GDP Then?". MeasuringWorth. Retrieved November 30, 2023. United States Gross Domestic Product deflator figures follow the MeasuringWorth series.
  13. ^ "Microcap Stock: A Guide for Investors". U.S. Securities and Exchange Commission. September 18, 2013. Archived from the original on February 26, 2025. Retrieved February 25, 2025.
  14. ^ "S&P U.S. Indices Methodology" (PDF). S&P Dow Jones Indices. February 20, 2025. Retrieved February 27, 2025.
  15. ^ a b "S&P Dow Jones Indices Announces Update to S&P Composite 1500 Market Cap Guidelines" (PDF). S&P Dow Jones Indices. January 2, 2025. Retrieved January 7, 2025.
Allikas: https://en.wikipedia.org/wiki/Large_cap
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