Market cap represents the value of a company, calculated as what it would cost to buy 100% of shares at the price shares were at last time the markets closed.
But it IS NOT the total amount that has been spent by everyone currently holding shares. For a company like AVZ, that amount will be much, much less (because it is still rising in value, and people are holding shares they bought much, much cheaper).
I don't know of any way to calculate that figure, but I thought of a way to make a rough estimate. By using a price/volume chart we can get a (very rough) estimate of how many shares have traded in different price bands. By multiplying the traded volume by the average price of each band, then dividing by the sum of all the traded volume you get an estimate of the average price of all the shares traded over that time period. I guess what I've just described is VWAP.
I just calculated this for AVZ over the last 12 months. If I've done the maths correctly (which is questionable), the average price of all shares bought in the last 12 months is 13.4c. That would equate to a market cap of $250M. So there's been a sum creation of $169.8M in wealth on paper for shares held now that were purchased in the last 12 months.
I don't know about others, but for me this is an interesting lens through which to view what the share price is doing. The closer that 12 month average is to the current trading price, the more it says that those holders who decided to sell don't have much confidence in the company growing beyond its current market cap. If there is a high volume of sales in that situation, that would be a very bad sign.
On the other hand, if the SP has come down in recent times, but still sits a good way above that long-term average and trading volume isn't especially high, it would suggest (to me) that the majority of shares are held by individuals with a high degree of confidence in the future value of the company going up.
AVZ Price at posting:
22.5¢ Sentiment: Buy Disclosure: Held
