So it seems that Alphabet is about to take Apple’s spot for most valuable company in the world. At least, that’s what afterhours trading in Alphabet shares is suggesting, after their earnings report yesterday.
This is where market caps stood at the close of trading yesterday:
In case you’re not aware of it: most listed companies will announce their big news outside of market trading hours. It gives everyone a chance to actually read through the reports before having to make a trade.
To celebrate Alphabet’s big day, a picturebook-style introduction to who they were/are:
And here’s an explanation of what all those titles mean:
Which is really all lead up for me to have a little rant about “market capitalisation” and what it actually means.
Here is how one calculates the value of “the most valuable company in the world”:
- You take the latest share price (in this case, the after hours share price); and
- You multiply it by the number of shares in existence.
In Alphabet/Google’s case:
- The latest “after hours” share price (at the time of writing this) is $791.
- There are about 688 million shares in issue.
- So the “value” of the company is $791 x 688 million = $544 billion.
- Which you can compare to Apple’s $535 billion at close of trade yesterday.
To illustrate how vulnerable this is, let’s say that I’m overcome this morning by a deep desire to invest some savings in Alphabet shares, and I say to my broker: “I have $800 here. Go forth and buy me a share on the after hours trading market. I don’t care about the extra $9 – I must have my share!”
The broker puts through a buy order for 1 share at $800. The transaction takes place. And for a brief moment in time:
- The latest “after hours” share price is $800.
- There are still about 688 million shares in issue
- And thus, the “value” of the company is $800 x 688 million = $550 billion.
My $800 transaction adds $6 billion worth of value for Alphabet.
I’m a real mover and shaker, me. Perhaps I should go ahead and throw that $800 bid out just so that I could say I’d created $6 billion in value for investors across the world. I mean, it’d be a fun time. Particularly if I could capture that on a Yahoo Finance screenshot. Who says that small investors don’t count?
The point is: tracking this kind of thing is a bit meaningless.
But it’s still fun to talk about.
Rolling Alpha posts about finance, economics, and sometimes stuff that is only quite loosely related. Follow me on Twitter @RollingAlpha, or like my page on Facebook at www.facebook.com/rollingalpha. Or both.