What does it mean for a company to have its market cap larger than the market size?
The difference between the two numbers is that the market size of a particular product is expressed as an annual number ($10 million per year, in your example).  The market cap of a stock, on the other hand, is a long-term valuation of the company. First read mhoran's answer, Then this -  If the company sold nothing but refrigerators, and had 40% market share, that's $4M/yr in sales. If they have a 30% profit margin, $1.2M in profit each year. A P/E of 10 would give a stock value totaling $12M, more than the market size. The numbers are related, of course, but one isn't the maximum of the other. If you are calculating: keep in mind that company A probably also sells washers, dryers, stoves, dish washers.... Each of which has their own market size. Also remember that people pay X times the value of earnings per share, so the value depends not on sales but on earnings, and expected growth. "The quickest way to approach this question is to first understand that it compares flows vs. levels. Market size is usually stated as an annual or other period figure, e.g. ""The market size of refrigerators will be $10mn in 2019.""  This is a flow figure. Market capitalization is a level figure at any given point in time, e.g. ""The market cap of the company was $20 million at the end of its last fiscal quarter."" Confusion sometimes occurs when levels and flows are used loosely for comparisons.  It is common for media to make statements such as ""Joe Billionaire is worth more than the GDP of Roselandia.""  That is comparing a current level (net worth) with an annual flow (GDP). With this in mind, there are a variety of conditions where a company's equity market value will exceed its market size.  The most extreme example is an innovating, development-stage enterprise, say, a biotech company, developing a new market for a new product; the current market size may be nil while the enterprise is worth something greater. The primary reason however for situations where a company's equity market cap is greater than its market size is usually that the financial market expects the enterprise (and oftentimes its market, though this isn't necessary) to grow substantially over time and hence the discounted value of the company may be greater than the current or near future market size. A final example:  US annual GDP (which comprises of much more than corporate incomes and profits) for 2014 was about $17.4tn while the nation's total equity market value in 2014 was $25.1tn, both according to the World Bank.  That latter figure also doesn't include the trillions of corporate debts these companies have issued so the total market cap of US, Inc. is substantially greater than $25.1tn." It is ALWAYS possible for a company's valuation in the market to be larger than the market it serves, and in fact it is not uncommon.  There's valid argument that Uber would be a good example of this, with a market cap of more than $60 billion.  Market cap is the total value of all shares outstanding.  Keep in mind that what a company's shares  trade for is less a reflection of its past (or, to some degree, even present) revenue activity and more of a speculative bet on what the company will do in the future. "A company's valuation includes its assets, in addition to projected earnings. Aside from the obvious issue that ""projected earnings"" can be wildly inaccurate or speculative (as in the case of startups and fast-moving industries like technology), a company's assets are not necessarily tied to the market the company is in. For the sake of illustration, say the government were to ban fast food tomorrow, and the market for that were to go all the way to zero.  McDonald's would still have almost 30 billion dollars worth of real estate holdings that would surely make the company worth something, even though it would have to stop selling its products. Similarly, Apple is sitting on approximately $200 billion dollars in cash and securities in overseas subsidiaries.  Even if they never make another cent selling iPhones and such, the company is still worth a lot because of those holdings. ""Corporate raiders"" back in the 70's and 80's made massive personal fortunes exploiting this disconnect in undervalued companies that had more assets than their market cap, by getting enough ownership to liquidate the company's assets.  Oliver Stone even made a movie about the phenomenon. So yes, it's certainly possible for a company to be worth more than the size of the market for its products." "You are comparing two things that are not comparable.  The ""market size"" would be the total annual revenue in one market, in this year.  The ""market caps"" of a company is the number of shares multiplied by the share price. This should be equal to the total profit that the company is going to make through its life time, taking into account that you would get interest on an investment, so future profits have to be counted less accordingly.  So if the ""market size"" is ten million dollars, and a company has four million revenue in that market with one million profit, and everyone thinks that company will continue making that profit for the next fifty years, then surely one million a year for the next 50 years is worth more than ten million.  That's if the market stands still. If the ""market size"" is ten million, and we expect that market size to double for the next three years, then the market size is still ten million, but a company having a 40% share of a market growing at that speed is going to be worth a lot more!"
When a stock price rises, the company's assets are worth more. This doesn't mean it gets more cash directly, but it can liquidate (= sell) some of its stocks for a higher return than before. Stock prices reflect future expectations of large groups of people, and may not be directly linked to traditional valuations for a number of reasons (not definitive). For example, a service like Twitter is so popular that even though it has no significant revenue and loses money, people are simply betting that it is deeply embedded enough that it will eventually find some way to make money. You can also see a number of cases of IPOs of various types of companies that do not even have a revenue model at all. Also, if there is rapid sales growth in A but B sales are flat, no one is likely to expect future profit growth in B such that the valuation will remain steady. If sales in A are accelerating, there may be anticipation that future profits will be high. Sometimes there are also other reasons, such as if A owns valuable proprietary assets, that will hold the values up. However, more information about these companies' financials is really needed in order to understand why this would be the case. The other answer has some good points, to which I'll add this:  I believe you're only considering a company's Initial Public Offering (IPO), when shares are first offered to the public.  An IPO is the way most companies get a public listing on the stock market. However, companies often go to market again and again to issue/sell more shares, after their IPO.  These secondary offerings don't make as many headlines as an IPO, but they are typical-enough occurrences in markets. When a company goes back to the market to raise additional funds (perhaps to fund expansion), the value of the company's existing shares that are being traded is a good indicator of what they may expect to get for a secondary offering of shares. A company about to raise money desires a higher share price, because that will permit them to issue less shares for the amount of money they need.  If the share price drops, they would need to issue more shares for the same amount of money – and dilute existing owners' share of the overall equity further. Also, consider corporate acquisitions:  When one company wants to buy another, instead of the transaction being entirely in cash (maybe they don't have that much in the bank!), there's often an equity component, which involves swapping shares of the company being acquired for new shares in the acquiring company or merged company.  In that case, the values of the shares in the public marketplace also matter, to provide relative valuations for the companies, etc. the implications are that the company's earnings per share may seem greater, (after the company buys them there will be less shares outstanding), giving wall street the impression that there is more growth potential than there really is. its an accounting gimmick that can work for a few quarters while the company evaluates how else to impress wall street I would say the most challenging fact for this assertion is that HFT firms operate with extremely limited capital bases. For a stock with say 10m shares ADV, even a very large and successful HFT strategy might use a position limit of no more than 5000 shares.  That is to say if you sum up and net the buys and sells for a stock across the day the HFT firm will never exceed 10,000 shares (2x position limits assuming it completely flipped) on a stock that trades 10,000,000 shares on a given day. The high volumes are attained through high turnover, the strategy might trade up to 500,000 shares (or 5% of the volume) attaining a 50x turnover.  But that brings me back to the original point. In the market microstructure literature market impact generally has been found to scale linearly or even sub-linearly for net volume executed.   If I alternate between thousands of 1 lot buy and sell orders, it would be very difficult for me to move the market because the market impact of every one of my buy orders roughly cancels the market impact of my almost exactly equal number of sell orders.   There might be a higher-order mechanism at work, but I'm genuinely curious what you think it might be. How could strategies that attain such small net positions have such out-sized impact on market direction? I think it's safe to say that Apple cannot grow in value in the next 20 years as fast as it did in the prior 20. It rose 100 fold to a current 730B valuation. 73 trillion dollars is nearly half the value of all wealth in the world.  Unfortunately, for every Apple, there are dozens of small companies that don't survive. Long term it appears the smaller cap stocks should beat large ones over the very long term if only for the fact that large companies can't maintain that level of growth indefinitely.  A non-tech example - Coke has a 174B market cap with 46B in annual sales. A small beverage company can have $10M in sales, and grow those sales 20-25%/year for 2 decades before hitting even $1B in sales. When you have zero percent of the pie, it's possible to grow your business at a fast pace those first years. "You are comparing ""market caps"" and ""enterprise value"".  If the company has four billion dollars cash in the bank, then the value would be four billion plus whatever the business itself is worth as a business. If the business itself is only worth 400 million, then you would have 4.4bn market caps and 400 million enterprise value. The ""enterprise value"" is basically how much the business would be worth if it had no cash or no debt.  These numbers would be a very unusual situation. It could happen for example if a big company has sold 90% of its business for cash. When you buy a share of the company, you get a tiny share of the business and you own a tiny share of the cash. This stock will very likely keep its value, but won't make much money.  On the other hand, more common would be a company where the business is worth 4bn, but the company has also 4bn debt. So it is worth exactly zero. Market caps close to zero, but enterprise value $4bn, because you ignore the debt in the enterprise value.  Edit: Sorry, got the ""enterprise value"" totally wrong, read millions instead of billions: Your numbers would mean that you have a huge, huge company with close to 440bn debt. Most likely someone made a mistake here. A ""normal"" situation would be say a company with a business that is worth $500 million, but they have $100 million debt, so market caps = $400 million but enterprise value = $500 million.  PS. Yahoo has the same nonsense numbers on their UK site, and for other companies (I just checked Marks and Spencer's which apparently has an enterprise value of 800 billion pound with a totally ridiculous P/E ratio." To be fair, the analyst is talking about the book value of the firm. Basically, the value of all the stuff it owns now. There are plenty of companies with negative book value that can justify a positive share price. Ford, for instance, had negative book value but positive future earnings. "Short answer: google finance's market cap calculation is nonstandard (a.k.a. wrong). The standard way of computing the market capitalization of a firm is to take the price of its common stock and multiply by the number of outstanding common stock shares.  If you do this using the numbers from google's site you get around $13.4B.  This can be verified by going to other sites like yahoo finance and bloomberg, which have the correct market capitalization already computed. The Whole Foods acquisition appears to be very cut-and-dry.  Investors will be compensated with $42 cash per share. Why are google finance's numbers wrong for market cap?  Sometimes people will add other things to ""market capitalization,"" like the value of the firm's debt and other debt-like securities.  My guess is that google has done something like this.  Whole Foods has just over $3B in total liabilities, which is around the size of the discrepancy you have found." Take a look at apple.  It has no debt.  So the ev is basically mkt cap - cash.  Also remember market cap is the float * share price nothing else.  Obviously share price takes into account the assets of the firm into perpituituy but the way you phrased it, adding debt , didnt sound quite right to me.  We remove cash since someone buying a company isn't going to pay for your cash.  In the transaction cash is distributed to share holders then the company is sold. There's a case to be made that companies below a certain market cap have more potential than the higher ones.  Consider, Apple cannot grow 100 fold from its current value. At $700B or so in value, that would be a $70T goal, just about the value of all the combined wealth in the entire US. At some point, the laws of large numbers take over, and exponential growth starts to flatten out.  On the flip side, Apple may have as good or better chance to rise 10% over the next 6-12 months as a random small cap stock. Just because your slice of pie gets bigger doesn't necessarily mean someone else's becomes smaller. In a lot of cases it's the entire pie that gets bigger. Why is the pie bigger? More investors (savers turn investors; foreign investments, etc.), more money printed (QE anyone?), Market sentiment changes (stock is priced by perceptions) And it can certainly get smaller. The first statement is talking about a sudden sharp increase in volume (double or more of average volume) with a sudden increase in price. In other words, there has been a last rush to buy the stock exhausting all the current bulls (buyers), so the bears (sellers) take over, at least temporarily. Whilst the second statement is talking about a gradual increase in volume as the price up trends (thus the use of a volume oscillator). In other words (in an uptrend), the bulls (buyers) are gradually increasing in numbers sending the price higher, and new buyers keep entering the market. (The opposite is the case for a down-trend). What it is trying to describe is the psychology around the current price of the stock.  In candlestick charts for example, if you get what is called a Bearish Engulfing Candle (where the open is higher than the previous day's close and the close is lower than the previous day's open) at the top of an uptrend, this could mean that the top may have been reached and the bears are taking over the bulls. A Bearish Engulfing candle is seen as a bearish reversal pattern, as the bulls start the day by opening the stock at a higher price than yesterday's close, but by the end of the day the bears have taken over as the price drops below yesterday's open. This reversal pattern can be even more pronounced and effective if it coincides with other chart indicators, such as an overbought momentum indicator. If you want to learn more look up about the Psychology of the market and Candlestick Charting. The stock market is generally a long term investment platform.  The share prices reflect more the companies potential to be profitable in the future rather than its actual value.  Companies that have good potential can over perform their actual value.  We saw this regularly  in the early days of the internet prior to the .com bust.  Companies would go up exponentially based on their idea's and potential.  Investors learned from that and are demanding more these days.  As a result companies that do not show growth potential go down. Companies that show growth and potential (apple and google for 2 easy examples) continue to go up.   Many companies have specific days where employees can buy and sell stocks.  there are minor ripples in the market on these days as the demand and supply are temporarily altered by a large segment of the owner base making trades.  For this reason some companies have a closed pool that is only open to inside trades that then executes the orders over time so that the effect is minimized on the actual stock price.  This is not happening with face book.  Instead many of the investors are dumping their stock directly into the market.  These are savvy investors and if there was potential for profit remaining you would not see the full scale exodus from the stock.  The fact that it is visible is scaring off investors itself.  I can not think of another instance that has gone like facebook, especially one that was called so accurately by many industry pundits.