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Capitalisation |
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CapitalisationThe injection of capital into a company.The process by which a company converts its cash reserves into new shares and issues them to existing shareholders on a pro rata basis. Also known as a Scrip Issue, or Bonus Issue. Note that since the effect of a capitalisation issue is to increase the number of shares in the company, the market price of the shares will typically fall to reflect the dilution.Similar MatchesCapitalisation issueCapitalisation issueSee 'scrip issue'. Market capitalisationMarket capitalisationThe market value of a quoted company which is calculated by multiplying its current share price by the number of shares in issue.e.g. Company A has 120 million shares in issue. The current market price is 96p. The market capitalisation is a shade over £115 million.The share prices of companies on the Official List of the London Stock Exchange move constantly in response to supply and demand, and as they move, so do market capitalisations. You can see what the market caps of these companies are by looking at the columns of prices in the financial press every day, or on websites.Of course, market caps calculated in this way do not necessarily reflect the actual market value of companies, as is shown when one company launches a takeover bid for another and (as frequently happens) pays a premium over the pre-bid price.Market caps are important for another reason, which is that some of the most important indices (especially the FTSE 100 and FTSE Mid 250) are based on them. Not only that - tracker funds make their investments on the basis of indices. |
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