Market capitalization

The market capitalization ( market capitalization English, short market cap, and market capitalization or market value ) is the total value of all listed shares of a corporation. He is the product of price and the total number of vacant units in circulation in the company. Held even in the stock shares are not included in the calculation of market capitalization.

Example calculation

Number of shares issued: 1,100,000 Number of shares directly held: 100,000 --------------------------------- --------------------- Number of shares freely in circulation: 1,000,000 Market Price per share: EUR 50 Market Capitalization: 50,000,000 EUR interpretation

The market capitalization of a company reflects the current market consensus on the value of the equity of a listed company resist (see also equity value ). It results from supply and demand for the Company's shares. Market capitalization is thus significantly influenced by stock market expectations in the future profitability of the company.

Shares, which have only a low free float may be more volatile, ie their price varies more than with equally large companies with high free float because few transactions may have a relatively large impact on the price on the stock exchange. This can lead to distortions in the calculated market capitalization.

Therefore, the company valuation used to determine the enterprise value method is used, where information such as be included in the balance sheet that are published every year. In general, the market capitalization does not match the sum of money which would be required to buy the entire company.

Market capitalization as a weighting factor of stock market indices

Market capitalization is also used for the weighting of individual stocks in a stock market index; not the total market capitalization is mostly used on the basis of all the shares issued, but only the free-float market capitalization. For this purpose, only the number of shares in free float are taken into account, the stock holdings of major shareholders is disregarded.