Lexicon
Market Capitalization
The market's running vote on what the whole company is worth today.
Market capitalization — market cap — is the total value the stock market currently places on a company, found by multiplying its share price by the number of shares outstanding.
A company with 2 billion shares outstanding trading at $50 each has a market cap of $100 billion. Multiply the two together and that's the figure headlines mean when they call a company a "$100 billion company" — not cash in the bank, not the value of its factories or patents, just price times share count.
Why market cap isn't the same as what a company is worth
Market cap reflects what investors are currently willing to pay, which can run well ahead of or behind a business's actual economic value depending on sentiment. It also ignores debt entirely — a company with a $10 billion market cap and $8 billion in debt is a very different proposition from one with the same market cap and no debt, even though the two look identical on this one measure alone. Enterprise value, which adds debt and subtracts cash, is the fuller picture for that reason.
Size categories
Market cap is also how companies get sorted into rough size buckets, which investors use as a shorthand for risk and behavior.
- Large-cap: generally the biggest, most established companies, roughly $10 billion and up.
- Mid-cap: mid-sized companies, roughly $2 billion to $10 billion.
- Small-cap: smaller, often younger or more volatile companies, generally under $2 billion.
The dollar cutoffs shift over time and aren't official, but the ordering — larger companies tend to be more stable, smaller ones more volatile — holds up reasonably well.