wombat 4 progress report ..., page-37

The term Market Cap is very widely used.

Market Cap = Number of outstanding shares x share price = share equity in a company = an estimate of company value.

The principle reason for a company to go public is because they can not produce the capital for operations and therefore seek revenue from the public. As a matter of course some public companies, particularly exploration will then periodically seek additional capital from investors by means of further share floats. This action alone will increase the market cap however it essentially adds no value to share price. This action does dilute the holdings of existing shareholders before the new float. There are many many examples of companies LKO, AEE and MKY to name a few, who continually seek further financial support through additional floats and have provided no substantial financial reward to the investors. A company whos market cap has increased over a long period by means of additional floats and shown little value to investors through an increase in share price is in many ways an indication of a failure. A parasite.

Many of the individuals operating these companies continually throw market cap at the shareholder as if it was a gift. When an increase in market cap is achieved through share price increase that is an achievement. When the share price remains constant and more shares are floated that is a failure. Unless you intend to purchase or sell the entire company market cap is of little interest.

For the average investor there are essentially only 2 things of interest 1 the share price 2 the potential for the share price.