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Market capitalization, often abbreviated to market cap, mkt. cap or market value, or referred to as just capitalization, is a business term that refers to the overall value of a company's stock. In essence, it is the price one must pay to buy an entire company. If one multiplies the number of shares of the company by the current price of those shares, the result is the market cap.The total market capitalization of all the companies listed on the New York Stock Exchange is greater than the amount of money in the United States.
Market cap is an important measure of the performance of a company's stock, as opposed to the company itself. It is not uncommon for a company's market cap to greatly exceed the book value of the company itself due to stock market oddities. For instance, in the late 1990s the shares of internet-related companies was highly valued by the market, and tiny companies with almost no sales had market caps of billions of dollars.
One reason for high market caps is that the price of a stock is determined by trade ( supply and demand) on the market. However, the amount of shares outstanding (i.e. available to outsiders for trading) is less than the total number of shares, and many shares will be owned by large institutional investor s who don't trade often. As a result, on any given trading day only a tiny percentage of shares is actually traded. If all available stock became available on the open market all at once, the price would plummet.
In large corporate takeoverA takeover in commerce refers to one company (the acquirer purchasing another (the target . Such events resemble mergers, but without the formation of a new company. Occurrence Corporate takeovers occur readily in the United States and in the United Kingds, the buying company usually either buys a controlling interest from institutional investors or venture capitalists at a discount (in cash), or, more commonly, pays for the shares of the second company in kind; i.e. in shares in itself. This allows the former owners (who now own stock in the controlling company) to sell off the shares bit-by-bit, so as to not ruin the price by dumping.
The opposite case, the book value of the company being more than the market cap, is typically more rare (selling shares is a method of raising money, after all). However, periodic dips in the market and other effects can result in such inversions of the market cap, making the company in question a target for the corporate raidA corporate raid is a business term, sometimes also referred to as breaking a company''. It describes a particular type of hostile takeover in which the assets of the purchased company are immediately sold off. The target company essentially disappears iner.
See also
- List of finance topicsWhat follows is a list of over 250 Wikipedia articles on finance topics. This list is an attempt to categorize all financial topics. An alphabetical listing of finance topics can be found at List of finance topics (alphabetical). Fundamental financial con
