What is Market Capitalization?
Market capitalization, or market cap, is the total market value of a publicly traded company’s outstanding shares. It equals the current share price multiplied by the total number of issued and outstanding shares. Market cap is a common measure of company size and is used to classify firms as large-cap, mid-cap, or small-cap.
How It Works
- Market Cap = Share Price * Shares Outstanding.
- Free-float market cap uses only freely tradable shares, excluding strategic holdings.
- Large-cap, mid-cap, and small-cap thresholds vary by market.
- Market cap is not the same as enterprise value, which also includes net debt.
- Used in index weighting (e.g., TASI), peer comparisons, and valuation multiples.
Saudi Context
The Saudi Stock Exchange (Tadawul) is the largest stock market in the GCC and MENA, with total market cap led by Saudi Aramco, the world’s most valuable listed energy company. The TASI index is free-float market-cap weighted. Saudi market-cap tiers are commonly cited as large-cap above SAR 10 billion, mid-cap SAR 1 to 10 billion, and small-cap below SAR 1 billion.
Example
A Tadawul-listed company has 200 million shares outstanding trading at SAR 45 per share. Market cap = 200,000,000 * 45 = SAR 9 billion. Adding net debt of SAR 1 billion gives an enterprise value of SAR 10 billion.