Editing Market capitalization

{{short description|Total value of a public company's outstanding shares}}
{{Use American English|date=December 2022}}
{{Use mdy dates|date=February 2015}}
[[File:New York Stock Exchange August 2017 02.jpg|thumb|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<ref>{{cite web|title=Market highlights for first half-year 2010|url=http://www.world-exchanges.org/files/file/stats%20and%20charts/July%202010%20WFE%20Market%20Highlights.pdf |archive-url=https://web.archive.org/web/20130722235155/http://www.world-exchanges.org/files/file/stats%20and%20charts/July%202010%20WFE%20Market%20Highlights.pdf |date=July 2010|archive-date=July 22, 2013 |access-date=May 29, 2013 |publisher=World Federation of Exchanges|df=mdy-all}}</ref>]]
'''Market capitalization''', sometimes referred to as '''market cap''', is the total value of a [[publicly traded company]]'s [[shares outstanding|outstanding common shares]] owned by stockholders.<ref name=":1">{{cite book |last1=Graham |first1=John R |last2=Smart |first2=Scott B. |last3=Megginson |first3=William J. |title=Corporate Finance |date=2010 |publisher=South-Western Cengage Learning |location=Mason OH |isbn=9780324782967 |page=387 |edition=3rd}}</ref> 

Market capitalization is equal to the [[share price|market price per common share]] multiplied by the number of common shares outstanding.<ref name=":1"/><ref name="investmcd">{{cite web|title=Market Capitalization: What It Means for Investors|url=http://www.investopedia.com/terms/m/marketcapitalization.asp |website=Investopedia |first=Jason |last=Fernando |date=March 5, 2024 |access-date=February 25, 2025 }}</ref><ref>{{cite web|title=Definition of market capitalisation|website=Financial Times Lexicon |publisher=[[Financial Times]] |url=http://lexicon.ft.com/Term?term=market-capitalisation|access-date=February 19, 2013 |archive-url=https://web.archive.org/web/20160925030019/http://lexicon.ft.com/Term?term=market-capitalisation|archive-date=September 25, 2016 }}</ref>

==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 (finance)|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 exchange]]s, being a measure of the sum of the market capitalizations of all companies listed on each stock exchange. The total capitalization of [[stock market]]s or [[Macroeconomics|economic regions]] may be compared with other [[economic indicator]]s (e.g. the [[Buffett indicator]]). The approximate total market capitalization of all publicly traded companies was:

*2023: US$111 trillion<ref>{{Cite web |date=March 8, 2024|title=FY 2023 Market Highlights |url=https://www.world-exchanges.org/storage/app/media/FY%202023%20Market%20Highlights%20Report%20v3.pdf |website=[[World Federation of Exchanges]] |url-status=live |archive-url=https://data.worldbank.org/indicator/CM.MKT.LCAP.CD?end=2020&most_recent_value_desc=true&start=1975 |archive-date=17 September 2024 |access-date=17 September 2024}}</ref>
*2024: US$126 trillion<ref>{{Cite web |date=7 February 2025 |title=FY 2024 Market Highlights |url=https://www.world-exchanges.org/storage/app/media/Cally%20Billimore/WFE%20FY%202024%20Market%20Highlights%20Report%2010022025.pdf |website=[[World Federation of Exchanges]] |author=WFE Statistics Team |access-date=1 March 2025}}</ref>
*February 2025: US$124 trillion<ref>{{cite magazine |author=WFE Statistics Team |date=February 2025 |issue=93 |title=Dashboard - February 2025 |url=https://focus.world-exchanges.org/issue/february-2025/dashboard |magazine=Focus |publisher=[[World Federation of Exchanges]] |access-date=2025-02-27}}</ref>

=== Historical estimates of world market cap ===
Total market capitalization of all publicly traded companies in the world from 1975 to 2020.<ref name=":0">{{Cite web |title=Market capitalization of listed domestic companies (current US$) {{!}} Data |url=https://data.worldbank.org/indicator/CM.MKT.LCAP.CD?end=2020&most_recent_value_desc=true&start=1975 |access-date=September 20, 2021 |website=Data.WorldBank.org}}</ref>
{| class="wikitable sortable" style="text-align:right;"
!rowspan=2|Year
!colspan=2|World market cap
!rowspan=2|Number of<br>listed<br>companies
|-
!(in mil. US$)
!(% of [[Gross domestic product|GDP]])
|-
|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
|-
|2025
|159,360,000
|158.1
|48,669
|}

== Calculation ==
Market cap is given by the formula <math display="inline"> \text{MC} = N \times P </math>, where ''MC'' is the market capitalization, ''N'' is the number of common shares outstanding, and ''P'' is the market price per common share.<ref name=":1"/>

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 [[Capitalization-weighted index#Free-float_weighting|free-float market cap]] uses just the floating number of shares in the calculation, generally resulting in a smaller number.

== Market cap terms ==
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Traditionally, companies were divided into large-cap, mid-cap, and [[Small cap company|small-cap]].<ref>{{Cite web |title=Large Cap, Mid Cap, and Small Cap Stocks |url=https://www.fe.training/free-resources/asset-management/large-cap-mid-cap-and-small-cap-stocks/ |access-date=February 25, 2025 |date=July 2, 2021 |website=Financial Edge |first=Victoria |last=Collin |language=en-US}}</ref><ref name="investmcd" /> The terms [[mega-cap]] and [[microcap stock|micro-cap]] have since come into common use,<ref>{{cite web|title=Mega Cap: Companies With Market Caps Above $200 Billion|url=http://www.investopedia.com/terms/m/megacap.asp |website=Investopedia |access-date=February 25, 2025|first=James |last=Chen |date=April 27, 2022}}</ref><ref>{{cite web|title=Micro-Cap: Definition in Stock Investing, Risks Vs. Larger Caps|url=http://www.investopedia.com/terms/m/microcapstock.asp|access-date=February 25, 2025 |website=Investopedia |first=James |last=Chen |date=July 12, 2022}}</ref> and [[nano-cap]] is sometimes heard. Large caps have a slow growth rate as compared to small caps.<ref name=":1" /> Different numbers are used by different indexes;<ref>{{Cite web |url=http://www.investorwords.com/2969/market_capitalization.html |title=What is Market Capitalization? definition and meaning |date=2020 |website=InvestorWords |publisher=WebFinance, Inc. |access-date=August 3, 2008 |archive-date=October 1, 2020 |archive-url=https://web.archive.org/web/20201001211843/http://www.investorwords.com/2969/market_capitalization.html |url-status=dead }}</ref> 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 [[real versus nominal value (economics)|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:<ref name="finra-mktcap"/>

{| class="wikitable"
|+ Market cap categories per [[FINRA]]<ref name="finra-mktcap">{{Cite web|url=https://www.finra.org/investors/insights/market-cap|title=Market Cap Explained|website=[[FINRA]]|date=30 September 2022 |access-date=2025-02-25 |archive-url=https://web.archive.org/web/20250204011704/https://www.finra.org/investors/insights/market-cap |archive-date=2025-02-04 |url-status=live}}</ref>
!rowspan=2|Category
!colspan=2|Market capitalization of individual stock<br>(US$ billions)
|-
!(FINRA, 2022)
!([[GDP deflator]] adjusted to {{Inflation/year|US-GDP}} [[US$]]){{Inflation/fn|US-GDP}}
|-
| [[Mega-cap]] || ≥ $200 || ≥ ${{Inflation|US-GDP|200|2022|fmt=c}}
|-
| Large-cap || $10{{snd}}$200 || ${{Inflation|US-GDP|10|2022|fmt=c}}{{snd}}${{Inflation|US-GDP|200|2022|fmt=c}}  
|-
| Mid-cap || $2{{snd}}$10 || ${{Inflation|US-GDP|2|2022|fmt=c}}{{snd}}${{Inflation|US-GDP|10|2022|fmt=c}}
|-
| [[Small-cap]] || $0.25{{snd}}$2 || ${{Inflation|US-GDP|0.25|2022|r=2|fmt=c}}{{snd}}${{Inflation|US-GDP|2|2022|fmt=c}}
|-
| [[Microcap stock|Micro-cap]]  || < $0.25|| < ${{Inflation|US-GDP|0.25|2022|r=2}}
|}

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&nbsp;million (as of 2013);<ref name="sec-micro-guide">{{cite web|url=https://www.sec.gov/investor/pubs/microcapstock.htm|title=Microcap Stock: A Guide for Investors|website=[[U.S. Securities and Exchange Commission]] |date=September 18, 2013 |access-date=2025-02-25 |archiveurl=https://archive.today/20250226065424/https://www.sec.gov/about/reports-publications/investorpubsmicrocapstock |archivedate=2025-02-26 |url-status=live}}</ref> which is equivalent to less than ${{Inflation|US-GDP|50|2013|fmt=c}} million in {{Inflation/year|US-GDP}}.{{Inflation/fn|US-GDP}}

[[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,<ref name="sp-methodology">{{cite web | url=https://www.spglobal.com/spdji/en/documents/methodologies/methodology-sp-us-indices.pdf | title=S&P U.S. Indices Methodology |publisher=[[S&P Dow Jones Indices]]|date=February 20, 2025|access-date=February 27, 2025}}</ref> a stock's market capitalization at the time of addition must be within the respective range in the following table:

{| class="wikitable"
|+ Market cap requirements for major S&P indices, as of 2025<ref name="sp2025-01-02">{{cite web |url = https://www.spglobal.com/spdji/en/documents/indexnews/announcements/20250102-1476019/1476019_2025janmktcapguidelines.pdf |title= S&P Dow Jones Indices Announces Update to S&P Composite 1500 Market Cap Guidelines |date = January 2, 2025 |website=[[S&P Dow Jones Indices]] |access-date = January 7, 2025}}</ref>
|-
! Index !! Category !! Market capitalization required for addition
|- 
| [[S&P 500]] || Large-cap || ≥ US$20.5&nbsp;billion
|- 
| [[S&P 400]] || Mid-cap || $7.4&nbsp;billion{{snd}}$20.5&nbsp;billion
|- 
| [[S&P 600]] || [[Small-cap]] || $1&nbsp;billion{{snd}}$7.4&nbsp;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.<ref name="sp2025-01-02"/>

== See also ==
*[[Authorised capital]]
*[[List of countries by stock market capitalization]]
*[[List of public corporations by market capitalization]]
*[[Market price]]
*[[Share repurchase]]
*[[Treasury stock]]

== References ==
<ref name="marketcapcompany">{{cite web |title=Global Market Capitalization Tracker |url=https://marketcap.company/ |website=MarketCap.Company |access-date=April 1, 2025}}</ref>
{{Reflist}}


== External links ==
{{Wiktionary|market capitalization}}
* [http://data.worldbank.org/indicator/CM.MKT.LCAP.CD Market capitalization of listed domestic companies (current US$)] by country since 1975 – World Bank dataset

{{Stock market}}

[[Category:Publicly traded companies]]
[[Category:Business terms]]