Harbor Coffee, our fictional coffee business, trades at $66 a share; Pinegate Power, a fictional utility, trades at $33. Does Pinegate have half the stock-market value?
No. Harbor has 50 million shares outstanding, while Pinegate has 100 million. At their year 3 year-end prices, both come to $3.3 billion. All prices here are in US dollars.
Pinegate's shares cost half as much, but there are twice as many of them. The price of one slice cannot tell you the size of the whole company.
The price of all the shares
Market capitalization, or market cap, is the stock-market value of a company's outstanding common shares. It puts a price on all those shares together.
Shares outstanding are shares held by investors, including company insiders and owners whose shares have trading restrictions. They count ownership, not how many shares changed hands during a trading session.
For a company with one share class:
For Harbor, $66 × 50 million = $3,300 million, or $3.3 billion. Add Tessel Software, another fictional company, using its year 3 year-end figures. In the table, m means million and bn means billion.
| Company | Price | Shares | Market cap |
|---|---|---|---|
| Harbor Coffee | $66 | 50m | $3.3bn |
| Pinegate Power | $33 | 100m | $3.3bn |
| Tessel Software | $120 | 112.5m | $13.5bn |
Pinegate's $33 × 100 million gives the same $3.3 billion. Tessel's $120 × 112.5 million gives $13.5 billion.
Market cap is a snapshot. Use the shares outstanding on the price date. As with the quotes in the previous lesson, check the clock: yesterday's close and a live price can produce different market caps for the same company.
For share classes with different economic rights, match each class's value per share to its own share count, then add the values.
What counts as large or small
One US convention, described by FINRA, uses these size buckets:
- Micro-cap: Below $250 million.
- Small-cap: $250 million to below $2 billion.
- Mid-cap: $2 billion to below $10 billion.
- Large-cap: $10 billion to below $200 billion.
- Mega-cap: $200 billion or more.
That puts Harbor and Pinegate in mid-cap territory and Tessel in large-cap. "Mid" may sound modest, but it still means billions of dollars.
Providers and indexes set their own boundaries and can revise them. A size label only makes sense alongside its dollar range.
Size is a description, not a grade. Neither large caps nor small caps come with a promise of safety or growth.
Float is the tradable portion
Free float is the portion of outstanding shares counted as available for public trading. Providers often exclude restricted shares and large stakes held to control the company; the exact rules vary.
Take a separate company with 100 outstanding shares. Say 20 are excluded from float. That leaves 100 − 20 = 80 shares, or 80%, available for public trading.
All 100 shares still count toward market cap. Leaving 20 out of float does not make them disappear.
Float describes potential supply, not a count of sell orders. An owner can hold freely tradable shares for years without offering them for sale.
The S&P 500 uses float-adjusted market cap for its weights, counting the publicly available portion. That distinction matters when you read stock indexes, which combine many companies into one market measure.
How to compare company size
Market cap helps you put peers of similar size next to each other. In StockPolly's screener, changing the market-cap range changes which companies appear. The filter narrows the list by size; it does not tell you which stocks are worth buying.
Check the ranges when switching tools. StockPolly's September 2026 small-cap preset starts at $300 million, compared with $250 million in the convention above.
A stock split changes the number of share units and their price together, leaving market cap unchanged by the split itself. The lower price can make a stock look cheaper on a list without making the company any smaller.
What market cap leaves out
Market cap can rise without a dollar reaching the business. Suppose Harbor's price rises from $66 to $67 while its share count stays at 50 million. Its market cap rises by $1 × 50 million = $50 million. The calculation applies the new quote to all 50 million shares, even if only a small fraction changed hands.
As in our first secondary-market trade, the buyer pays the seller. Applying that trade's price to every outstanding share does not mean the company raised $3.3 billion.
Market cap also differs from revenue, what the business earns from sales, and book equity, the shareholders' stake recorded in the accounts. Nor is it the final bill for a takeover: enterprise value considers debt and cash as well as the shares.
Whether the shares deserve their price is the separate question of price versus value. Market cap gives you the market's price tag; it cannot tell you whether that price is a bargain.
Before comparing two market caps, check the date, the share-count definition and the currency. Then you can compare company size without being fooled by the price of a single share. The same size measure helps explain why some companies count more than others in an index.
In short
- For one share class, market cap is share price multiplied by shares outstanding.
- A low share price alone does not mean a small or cheap company.
- Size buckets are conventions whose boundaries differ across providers.
- Shares outside free float still count toward full market cap.
- Market cap measures the market's price tag on the shares, not whether the stock is a bargain.