Business & finance · also called market cap
Market capitalization
Market capitalization is the total stock-market value of a public company, calculated as its share price multiplied by the number of shares outstanding.
Market cap is the price tag the stock market puts on a company's equity at any moment. If a company has 500 million shares trading at US$60, its market cap is US$30 billion. It changes every second the market is open.
Market cap measures equity value only. To see what it would cost to buy the whole business, including its debts and minus its cash, analysts use enterprise value (EV), which feeds valuation ratios such as EV/EBITDA. Two companies with the same market cap can have very different EVs if one is heavily indebted.
In ad tech, market caps swing widely with growth expectations, advertising cycles and regulatory news. Comparing market caps also needs care with gross vs net reporting, because price-to-revenue multiples are not comparable when revenue is defined differently. Companies whose market caps fall sharply can become targets for take-private deal deals.
Think of it like this
Market capitalization is like valuing a building by multiplying the latest price paid for one flat by the total number of flats.
An example
An SSP has 140 million shares at US$20: market cap = US$2.8 billion. With US$400M debt and US$300M cash, enterprise value = US$2.9 billion.
Related terms
EV/EBITDA
EV/EBITDA is a valuation ratio that divides a company's enterprise value (market cap plus debt minus cash) by its EBITDA, showing how many years of operating earnings the business is priced at.
Take-private deal
A take-private deal is when an investor, usually a private equity firm, buys all the shares of a public company so it is delisted from the stock exchange and becomes privately owned.
Earnings report
An earnings report is the periodic announcement, usually quarterly, in which a public company discloses its revenue, profit and other key results, often with an investor call and updated guidance.
Guidance (forecast)
Guidance is a public company's own forecast of its future results, such as next quarter's revenue or full-year adjusted EBITDA, usually given as a range alongside an earnings report.
Form 10-K
Form 10-K is the comprehensive annual report that US public companies must file with the Securities and Exchange Commission, including audited financial statements, business description and risk factors.