Newsletter Issue #1003: Two Trillion Bucks and Counting
August 25th, 2020I’m writing this on the cusp of Apple’s four-for-one stock price split.It’ll mean, in a practical way, that you will be able to buy a share of stock for 25% of the former price and thus with 25% of the former value. Practically, it’s main value is to make it more affordable for regular people. After all, how many of you can easily buy a company’s stock at more than $500 a pop?
Now, here’s an official definition for market cap: “Market cap — or market capitalization — refers to the total value of all a company’s shares of stock. It is calculated by multiplying the price of a stock by its total number of outstanding shares. For example, a company with 20 million shares selling at $50 a share would have a market cap of $1 billion.”
As you can see, it’s a very artificial rating, based on the vagaries of the stock market and not on a company’s actual finances, although big companies ought to do better. But there’s also a level of hype involved; it’s based on perceptions as much as reality, so some companies might find themselves valued way behind their worth.
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