Skip to content
All library documents

Why Company Market Capitalization Varies Across Share Classes

Article Quant Q&A · Author: Bondifrench
Read the original

Summary

The document examines why reported market capitalization for Alphabet can differ across financial data providers. Its starting point is the familiar share-price-times-shares-outstanding definition, but Alphabet’s multiple share classes raise questions about which shares and prices belong in the total. The discussion notes that some providers report different figures depending on whether users view one listed class or another, and that reported share counts also vary.

The answer argues that market capitalization has several possible definitions suited to different purposes. A company-wide measure may include every share class, while a security-specific figure can support calculations such as price-to-earnings ratios. The treatment of dual-listed or unlisted classes, free float, and shares available to foreign investors can also change the calculation. The document does not resolve Alphabet’s correct figure or establish a definitive price for its unlisted Class B shares; it recommends choosing a formula based on the intended use and accepting that providers may report different measures.

Key ideas

  • Market capitalization is often calculated as share price multiplied by shares outstanding, but multiple share classes complicate the inputs.
  • Data providers may report different figures because they use different share classes, share counts, or definitions.
  • A company-wide market value and a security-specific capitalization measure serve different analytical purposes.
  • Free float, dual listings, unlisted shares, and foreign-investor access can affect the chosen calculation.
  • Select a market capitalization definition according to the analysis it is intended to support.

Tags

EquitiesStatisticsUS markets
Full text
# Correct Alphabet (Google) market cap calculation?


# Correct Alphabet (Google) market cap calculation?












Given the definition: `Market capitalization (market cap) is the total market value of the shares outstanding of a publicly traded company; it is equal to the share price times the number of shares outstanding.`

I find it quite puzzling to find different numbers everywhere for Google's (now renamed Alphabet) market capitalisation. I have summarised my findings in this Google sheet (https://docs.google.com/spreadsheets/d/1C8sSp7Kf3wdiiYFHCGM2I3qvjESbLjZR04OCFZHBDi0/edit?usp=sharing) hope you can all access it.

It ranges from the totally wrong for Market Cap (see CNBC), to inconsistent (see Nasdaq, WSJ and Yahoo finance) to differences in number of shares (Google finance and Bloomberg.com don't seem to agree on the number of outstanding shares). My aim is first to understand what is the right number for outstanding shares and market cap and second what is the right "price" for the Class B shares that are unlisted.

Data in the sheet is as of Feb 4th, 2016 11AM Sydney time (so based on closing prices, way after market closes).

## Answer by Fenix (score 1)

https://quant.stackexchange.com/a/23106

This has been driving me nuts as well!

Thanks for providing the spreadsheet. Looking at MSN Money there is a discrepancy of over 11B in market cap between viewing GOOG and GOOGL shares! GOOGL has a market cap associated with 537B and GOOG has a market cap of 526B. I don't understand how one site can list two different market caps based on the class of shares being viewed. I thought it would be Class A Price x Class A Shares Outstanding, + Class B... + Class C... I would think that these should add up to the same amount regardless of which class of shares you are viewing, but apparently not.

## Answer by NegativeJo (score 0)

https://quant.stackexchange.com/a/24587

There are many definitions of market cap and it is likely that depending on specific views and goals of different platforms or investment teams, one or several might get used.

Here are some variants I have been exposed to : 1) Definition given by Fenix. This is the most intuitive. A few questions asked frequently around that : a) What if a class is dual listed and has different prices ? b) What if a class is not listed ? c) Do you want the full market cap or the free float ? d) Also for some countries you might ask what part of this market cap is available to foreign investors.

2) Market Cap equivalent for a specific security... will be useful to have a Price to Earnings metrics for example. So each security has an equivalent market cap which is then used for ratios computations. Be aware that this number might need to be different depending on share structure (sometimes preferred have different attribution of earnings, so PE would need to be adjusted while BM wouldn't)

So in conclusion, I would ask myself : WHY do I want to use this market cap for ? And from there build my own formula and accept that there can be variations to what others think,compute and report.

Good luck !

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.