Market Capitalization

The market capitalization of a company is indicated by the stock market. It is calculated by the total shares of a company multiplied by the current price of the stock. For example, Apple is trading at $131.79, and its market cap is $2.32T. Therefore, the number of outstanding shares of Apple are 17.6B. A stock split or reverse split does not affect the market cap of a company. For example, Apple had five splits since its IPO. The latest split was on 28th August 2020 that was a 4 to 1 split. Meaning that if you had an Apple stock at that time, after the split, you had four stocks of Apple but with a lower price (Price/4).

A company's market cap is initially indicated during IPO. At this stage, Fundamental Analysis is used to estimate the initial value of a company. The value of the share is also determined by how many shares are going to be issued. After the IPO stage, the value of the stock will be dictated by the market opinion on the company (supply and demand).

Companies are classified into three groups based on their market caps, including large-cap, mid-cap, and small-cap companies. Large-cap companies have market caps greater than $10B. A few examples of these companies are Apple, Microsoft, Amazon, Tesla, and Facebook. Mid-cap companies have market caps between $2B to $10B. A few examples of these companies are NNDM, BNGO, and DDD. Small-cap companies have market caps smaller than $2B. A few examples of these companies are GILT, ISR, and SENS. The market cap is related to the company's development phase. Larger-cap companies are more established companies with smaller growth potential. However, they carry less risk of bankruptcy during an economic downturn. Small-cap companies suggest more growth potential but have a higher risk of going out of business.

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