Market Capitalization

Market capitalization (or market cap) is the total value of all a company’s shares. You calculate it by multiplying the current share price by the number of shares that exist. If a company has 1 million shares trading at $50 each, its market cap is $50 million.

It’s the most common way to measure how big a publicly traded company is.

Why it matters

You’ll often see companies grouped into categories based on their market cap:

• Large-cap: Generally over $10 billion. Think Royal Bank, Shopify, Apple. These are well-established companies that tend to be more stable.
• Mid-cap: Roughly $2 billion to $10 billion. Companies that are past the startup phase but still have meaningful room to grow.
• Small-cap: Under $2 billion. Younger or more niche companies. They can grow faster but tend to be more volatile.

When you buy an index ETF, it usually weighs companies by market cap. That means the biggest companies make up the largest portion of the fund. If you own a Canadian index ETF, a big chunk of your money is in banks and energy companies because those have the highest market caps in Canada. Understanding this helps you know what you actually own.

A concrete example

Royal Bank of Canada has roughly 1.4 billion shares outstanding. At a share price of around $170, its market cap is approximately $238 billion, making it one of Canada’s largest companies. A smaller company like Aritzia, with about 110 million shares at $40, has a market cap of roughly $4.4 billion. Same stock exchange, very different scale.

Market cap also shifts constantly because it’s tied to the share price. A company’s market cap can jump or drop by billions in a single day based on how the stock moves. It’s a snapshot, not a fixed label.