Term:MARKET CAPITALISATION

The current market price of a share multiplied by the number of shares that the company has in issue. The market capitalisation of a company is the value which the market gives it at any point in time. It is also the basis for the weighting of most indexes. The JSE indexes utilise the company’s “free-float market capitalisation” where the free float is the number of issued shares which are generally available for trading. For example, a company’s free float excludes shares held by overseas or non-South African investors, shares which are part of an employee share option scheme, any shares which are subject to any sort of lock-in, shares held by government or quasi-government organisations like the government pension fund and any shares which are held by the company’s founder or his/her family. Every listed company’s market capitalisation is given (in millions of rands) at the top of the screen of the ShareFriend software for that share’s chart. It changes as you move your mouse left and right in the chart, reflecting the different daily share prices. Consider this snip out of a typical ShareFriend chart:

market cap

Market Capitalisation figure found in ShareFriend software

Here you can see that this particular company has a market capitalisation of R247bn rand.

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