Talk:Market capitalization

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[edit] Amounts

The market cap of the NYSE is worth more cash money then there is in the United States.

Phrasing aside, is this true? And is this M0, M1, M2, something else? --Charles A. L. 20:02, Nov 12, 2003 (UTC)
This is true based on the amount of physical, paper, cash. Change the article to specify this.
"The total market capitalization of all the companies listed on the New York Stock Exchange is greater than the amount of money in the United States." Yes, so? Stocks are also money, they're just as liquid as bank deposits.--Jerryseinfeld 07:13, 25 Dec 2004 (UTC)
Stocks may be in general liquid, but they are not nearly as liquid as bank deposits. There's nothing to stop me from withdrawing all my money from a bank, but if I can't find a buyer for my stocks I can't sell them. In practice this isn't usually a problem, but it's an important distinction. For the average investor stocks will behave in a manner similar to bank deposits, but if you hold large quantities of stock or hold stock in thinly traded areas it will be very clear that moving in and out of your positions can be difficult.--rosciol 15:48, Jan 13, 2005 (UTC)
The same problem arises for bank deposits: if everybody wants to withdraw money at the same time, banks will go bankrupt and you won't be able to get any cash. This did happen (basically during any major financial crisis).
The problem of holding large quantities of stock is more a question of selling price than a matter of liquidity, considering that you will always be able to sell a stock if you are ready to adjust (sometimes dramatically) its price.
So strictly speaking, stocks might be more liquid than cash.

The total market capitalization of all the companies listed on the New York Stock Exchange is greater than the amount of money in the United States.

I really think this sentence requires more explanation. Why is this significant? Does it suggest foreign ownership? Debt? Overvalued stocks? Help please. -- Blorg 14:40, 15 Jun 2005 (UTC)
None of the above. It suggests a fundamental truth about stocks and market cap, though, namely that if every stockholder of every company attempted to sell every share at one moment in time, the stock prices would drop precipitously and the total net of all the sales would be far less than the sum of all of today's market caps. For this reason, stock holdings aren't, for example, calculated as part of the broad (M3) money supply, and stock holdings cannot be said to act as a store of value in the same way that money can be. -ikkyu2 (talk) 07:18, 19 October 2006 (UTC)

[edit] Plummet

The article emphasizes the supply of stock on the open market as a key component in a company's market cap. "If the supply increased, the stock price would plummet." This is overly simplistic. Perhaps this view is indicative of the psychology of a market timer, but many investors will have other approaches to valuing a company. For example, they will price the stock at a price they would pay IF the whole company was for sale on the open market. Thus, the amount of stock actually available has no impact on the price these buyers would be willing to pay for the stock.

Good point about "they will price the stock at a price they would pay IF the whole company was for sale". A good example may be GOOG ([1]):
On Aug 19 2004
Shares Outstanding: 172.85M
Float: 19.60M
Today (16:50, 25 Nov 2004 (UTC))
Shares Outstanding: 273.42M
Float: 127.70M
Then compare that with the price action.
--Jerryseinfeld 16:50, 25 Nov 2004 (UTC)
The market cap is a combination of the company valuations of all types of investors, each with different ways of valuing the company.

[edit] Rant

The first paragraph here appears to be a rant against the concept of market cap. It does have limited use, it is true. but that doesn't justify what is written here. Morwen - Talk 16:16, 25 Nov 2004 (UTC)

  • "The price would plummet if a greater percentage of an company's shares were sold"
    • The article first states that the company is bought ("to buy an entire company"), not sold. Price usually increase on takeover rumors and announcements.--Jerryseinfeld 07:33, 25 Dec 2004 (UTC)
  • "The "market" has not determined the value of a corporation, only a few shares."
  • The over-inflated market cap of AOL allowed it to leverage that value over the under priced Time-Warner, a company with greater tangible assets.
    • This could make a good topic, how market cap can be used for takeovers. Perhaps with a mention of the "pooling of interests" accounting that was used up until the early 2000s.--Jerryseinfeld 07:33, 25 Dec 2004 (UTC)

[edit] Analysis

That analysis is really struggling to grasp the concept. A share in a company is just a claim on future cash flow, nothing else. If there is anticipation of future cash flow the stock will be priced after that. The only thing a shareholder is interested in is return in his investment in form of money from a money generating firm. There are no cheap or expensive stocks, there's just anticipated growth in future cash flow to shareholders. When anticipation falls true new estimates will be set and the price will increase, which is the primary source of return on investment. Second is a part of positive cash flow in form of dividend.--Jerryseinfeld 07:16, 25 Dec 2004 (UTC)

"The size and growth of a company's market capitalization often is one of the critical measurements of a public company's success or failure." This is not true. Only the organic growth of market cap (ie. no shareholder dilution) can be said to be a critical mesaurement of a public companies sucsess, but even this statement shouldn't be made in this article because its too confusing.


[edit] Changes

I made some changes to this article before learning the proper etiquette, but I was so moved to fix things that I got ahead of myself. Apologies for stepping on toes.

In essence, it is the price one must pay to buy an entire company (putting aside that trying to buy an entire company off the market would cause immense price distortions, and takeovers are almost always at more than market price).

This is wrong. The price to buy an entire company is either enterprise value, which includes a firm's debt and cash, or, if the intention is to own 100% of a company's equity, equity value, which is a fully-diluted measure that incorporates stock options and convertible securities. Also, the takeover concept in general does nothing but confuse the definition of market capitalization. I deleted the buyout/takeover section further down the page for the same reason.

I simplified the Valuation section because it included some random speculation about why a stock price may be what it is which didn't seem relevant or credible. What is a "high" market capitalization? I think it is relevant to mention that market cap almost always exceeds book value because it highlights the difference between the accounting definition of shareholder's equity and market capitalization. But to judge a market cap as "high" is totally subjective and the reasons given amount to even more subjectivity.

The Time Horizons section didn't seem to be related whatsoever.

mullacc 01:04, 12 October 2005 (UTC)


Insiders generally don't hold more than a few to perhaps 10% of its own stock, and treasury stock is almost always a smaller percentage

Made some copyedits + removed this line because it is an over-generalization. The example in the article shows that Yahoo insiders hold 14%. Walmart insiders hold 40% and at Google the percentage is roughly 50% (including approximately 30% owned by the two founders).

JJay 11:25, 12 October 2005 (UTC)

[edit] Merge Small-cap, Large-cap, and Mid-cap here

I'd like to merge the Small-cap, Large-cap, and Mid-cap topics here... specifically, into the "Categorization of companies by market cap" section. What do ya'll think? Mikeblas 20:22, 29 December 2005 (UTC)


Sounds like a good idea. -Grick(talk to me!) 20:57, 29 December 2005 (UTC)
I did the merge, keeping the numbers that were already there. User:24.176.75.203, I see that you've changed the numbers. Do you want to cite a source, or should we make a table since there are so many different definitions? It appears to be brokerage-specific. Do you disagree that many investors use the Russel indexes to define the categories? -- Mikeblas 10:24, 31 December 2005 (UTC)

[edit] Graph/Chart

I think it would be really good to have a graph or chart of the distribution of nano, micro, small, mid, and large-cap stocks. That way people can see intuitively how the distribution of the market looks. We can include percentages as well. for a quick screen of everything, check out: [2]. You can go quickly through the pages by editting the last number in the link, which shows which number stock in the market cap sort you are on. By jumping around on the pages, you can easily figure out how much are in each category. --68.239.240.144 02:30, 22 February 2007 (UTC) It'd be even better if we could show the differences per year and how they are changing over time. Of course the picture should be SVG. --165.230.46.153 13:54, 22 February 2007 (UTC)

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