What Is Market Capitalization?

Market capitalization, often shortened to market cap, expresses what the market currently values the equity of a company at. It is calculated by multiplying the latest share price by the number of shares outstanding. It measures the market's valuation of the shares and not the assets, the revenue or the debt of the company, and it changes every time the price changes.

Index providers and exchanges also use a float-adjusted version. The free float is the part of the shares that is available for public trading; shares held by founders, governments or other controlling holders are excluded. A float-adjusted market capitalization therefore measures the part of the company that investors can actually trade, and many indices weight their components by it. A company with several share classes needs a rule for adding the classes together, and providers state that rule in their methodology.

Market capitalization is often used to group companies into large-cap, mid-cap and small-cap, but the boundaries are set by each provider and change over time, so no fixed amount defines the groups. The figure is also not the price of buying a whole company: an acquisition price differs from the market price, and an acquirer takes on the company's debts as well.