Understanding Market Cap As Apple Hits $2tn Mark

Understanding Market Capitalization As Apple Hits $2 tn Mark

After reaching $2 trillion market capitalization (cap), Apple became the first US public company to achieve this feat. But what exactly does market cap mean? How is it calculated? Is billionaires’ wealth linked to market cap? Let us demystify it all.

Crux of the Matter

Apple’s Latest Feat
Recently, Apple hit the $2 trillion market cap and became the world’s most valuable company by surpassing Saudi Aramco’s $1.78 tn market cap. Apple’s stock rose after it declared 3rd quarter (Apr-Jun 2020) results, which showed massive growth. Apple also became the first US public traded company to have a $2 trillion market cap. It’s valuation doubled in just 2 years.

But What Is Market Capitalization?
Market Capitalization of a company means the total market value of outstanding shares. Outstanding shares are the total number of shares held by all shareholders, including retail owners, institutional owners, and the company’s owners. Market cap can be calculated only for publicly traded companies and fluctuation in the share price directly affects the market cap of a company.

Market cap = Outstanding shares of a company x current market price

For instance, if a company has 10 million outstanding shares and the current stock price is $50 then, the market cap of a company equals, $50 x 10 million = $500 mn.

Are Billionaires’ Wealth Linked To Market Cap?
Billionaires’ net worth is linked to the market capitalization of their company. Generally, they are company owners holding substantial amounts of the company’s stock. Let’s say if Facebook’s market cap is standing at $400 billion and Mark Zuckerberg owns 20% of its shares, then his net worth from owning Facebook would be $80 billion.

Moreover, billionaires or owners of companies get paychecks and dividends from their companies. It must be noted that the company’s stocks are not the only element in the net worth of a billionaire. Inherited wealth, private assets, paychecks, holdings in other companies, etc also contribute to it.

  • The DOW theory on stock price movement is a form of technical analysis. The theory was derived from 255 Wall Street Journal editorials written by Charles H. Dow, journalist, founder and first editor of The Wall Street Journal and co-founder of Dow Jones and Company.
  • Saudi Stock Exchange or Tadawul is a stock exchange in Saudi Arabia. It is supervised by the Capital Market Authority. On 11 December 2019, Saudi Aramco’s shares commenced trading on the Tadawul stock exchange and surpassed the $2 trillion mark on the second day of trading.
  • Apple was recently subject to internet memes when it released its $700 wheels for Mac pro. The company was criticised for these overly prized wheels and many parody videos were made in which the wheels were tested for skateboards.