What is meant by market capitalization?
The market cap is simply the number of shares outstanding, multiplied by the share price. The company doesn’t gain directly from an increase in the share price, but they can sell more shares, in order to raise more money. When a company incorporates they set the number of shares that the company will be allowed to issue. At the IPO the company will issue some of these shares, but will not issue all the shares that they are allowed to, they can then issue those shares later on if they need to raise more cash. The number of shares that they can potentially sell was set when they incorporated, and cannot be increased without a vote of the shareholders. The market cap is how much it would cost you to buy up all the outstanding shares of the company.
