Market capitalization

Total value of a public company's outstanding shares

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

[edit]

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 approximate total market capitalization of all publicly traded companies was:

* 2023: US$111 trillion[5]
* 2024: US$126 trillion[6]
* February 2025: US$124 trillion[7]

### Historical estimates of world market cap

[edit]

Total market capitalization of all publicly traded companies in the world from 1975 to 2020.[8]

Year  | World market cap  | Number of
listed
companies

|
|

(in mil. US$)  | (% of 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

## Calculation

[edit]

Market cap is given by the formula  MC = N × P {\textstyle {\text{MC}}=N\times P} , 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

[edit]

Traditionally, companies were divided into large-cap, mid-cap, and small-cap.[9][3] The terms mega-cap and micro-cap have since come into common use,[10][11] 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;[12] 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

[edit]

FINRA's investor education materials state that the following is a typical (not official) categorization of stocks by market capitalization:[13]

Market cap categories per FINRA[13] Category  | Market capitalization of individual stock
(US$ billions)

|

(FINRA, 2022)  | (GDP deflator adjusted to 2023 US$)[14]
Mega-cap | ≥ $200 | ≥ $207
Large-cap | $10 - $200 | $10 - $207
Mid-cap | $2 - $10 | $2 - $10
Small-cap | $0.25 - $2 | $0.26 - $2
Micro-cap | < $0.25 | < $0.26

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);[15] which is equivalent to less than $64 million in 2023.[14]

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,[16] 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[17] 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.[17]

## See also

[edit]

* Authorised capital
* List of countries by stock market capitalization
* List of public corporations by market capitalization
* Market price
* Treasury stock

## References

[edit]

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. ^ WFE Statistics Team (February 7, 2025). "FY 2024 Market Highlights" (PDF). World Federation of Exchanges. Retrieved March 1, 2025.
7. ^ WFE Statistics Team (February 2025). "Dashboard - February 2025". Focus. No. 93\. World Federation of Exchanges. Retrieved February 27, 2025.
8. ^ "Market capitalization of listed domestic companies (current US$) | Data". Data.WorldBank.org. Retrieved September 20, 2021.
9. ^ Collin, Victoria (July 2, 2021). "Large Cap, Mid Cap, and Small Cap Stocks". Financial Edge. Retrieved February 25, 2025.
10. ^ Chen, James (April 27, 2022). "Mega Cap: Companies With Market Caps Above $200 Billion". Investopedia. Retrieved February 25, 2025.
11. ^ Chen, James (July 12, 2022). "Micro-Cap: Definition in Stock Investing, Risks Vs. Larger Caps". Investopedia. Retrieved February 25, 2025.
12. ^ "What is Market Capitalization? definition and meaning". InvestorWords. WebFinance, Inc. 2020. Archived from the original on October 1, 2020. Retrieved August 3, 2008.
13. ^ a b "Market Cap Explained". FINRA. September 30, 2022. Archived from the original on February 4, 2025. Retrieved February 25, 2025.
14. ^ 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.
15. ^ "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.
16. ^ "S&P U.S. Indices Methodology" (PDF). S&P Dow Jones Indices. February 20, 2025. Retrieved February 27, 2025.
17. ^ 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.

## External links

[edit]

Look up market capitalization in Wiktionary, the free dictionary.

* Market capitalization of listed domestic companies (current US$) by country since 1975 – World Bank dataset

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