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A company’s market value, calculated as the total number of shares in circulation multiplied by the price to buy one share.
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.
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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.
There are different ways to classify companies according to their market capitalisation. Here are the three main examples.
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 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 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.|
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All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest.