Market capitalisation definition

What is market capitalisation?

Market capitalisation is the current market value of a publicly traded company. It’s often used as a measure of how successful a company is in its sector, the market share it commands, and how popular it is with consumers and investors alike.

How is market capitalisation calculated?

Market capitalisation is calculated by multiplying the total number of shares that a company has in circulation by the current share price. So, if a company has 10 million shares in the market trading at a price of £100 per share, its market capitalisation is £1 billion (10,000,000 x 100).

If the company’s share price rises to £150, its new market cap will be £1.5 billion. If it falls to £50, its new market cap will be £500 million.

 

Different types of market capitalisation

There are different ways to classify companies according to their market capitalisation. Here are the three main examples.

 

Large-cap

Large-cap companies have a market capitalisation of £10 billion or more. These companies are also sometimes called ‘blue-chip companies’, and they are often the largest, oldest and most well-established companies in their sector.

 

Mid-cap

Mid-cap companies have market caps of between £2 billion and £10 billion. They can also sometimes be called ‘growth stocks’ because they tend to be in the expansionary phase of their business’s development. 

 

Small-cap

Small-cap companies have market capitalisations between £300 million and £2 billion. Shares in small-cap companies can often be more affordable than shares in mid- or large-cap companies, but with a slightly higher degree of risk. 

H2	What is market capitalisation?
Overview	Market capitalisation is the current market value of a publicly traded company. It’s often used as a measure of how successful a company is in its sector, the market share it commands, and how popular it is with consumers and investors alike.