Misconceptions About Market Caps

Market capitalization does not measure the equity value of a company.

Shares are often over or under-valued by the market, meaning the

market price determines only how much the market is willing to pay for its shares.

The market cap does not determine the amount the company would cost to acquire

in a merger transaction. A better method of calculating the price of acquiring a business outright is the enterprise value. Market cap does not affect stock price.