A share price is not set by a company, a regulator, or an index. It is whatever price the last completed trade agreed to, between one buyer and one seller, on whichever exchange or trading system matched them. The next trade can happen at a different price seconds later, because it’s a different buyer and a different seller agreeing to a different number. Investor.gov’s own walkthrough of order types describes the mechanics behind that number: a market order to buy “generally will execute at or near” the current ask, the lowest price any seller is currently offering to sell at, while a market order to sell executes near the current bid, the highest price any buyer is currently offering to pay. The gap between those two, the bid-ask spread, is the standing disagreement between buyers and sellers at any given moment, and every trade closes it, briefly, at one number.
Market value, more precisely market capitalization, is that single number stretched across the whole company: current share price multiplied by total shares outstanding. Investor.gov’s glossary states it plainly, market cap is “the value of a corporation determined by multiplying the current public market price of one share of the corporation by the number of total outstanding shares.” A company with 400 million shares trading at $50 has a market cap of $20 billion; if the price rises to $55 with the share count unchanged, market cap rises to $22 billion without the company having done anything between those two prices. The reverse is just as mechanical: a company that issues more shares, whether through a stock-based pay program or a secondary offering, raises its share count, and if the price doesn’t move, market cap rises by exactly the value of the new shares, spread thinner across more of them.
Market cap is also a distinct thing from what a company is worth in the sense of assets or cash. It’s the market’s collective bet on the value of all future profit the company will ever produce, discounted back to today, filtered through however optimistic or pessimistic buyers and sellers happen to be this week. Two companies with identical revenue and profit can carry very different market caps if investors expect one of them to grow faster, or judge one riskier than the other. That’s also why market cap can be a poor stand-in for a company’s size in any operational sense, headcount, factories, revenue, since it reflects expectation as much as history.
None of this requires a company to have gone through an IPO in the traditional sense to be measured this way, but it does require the company to be public in the specific sense investor.gov defines: subject to ongoing reporting obligations, whether because it sold securities in a public offering, grew its investor base past a size that triggers those obligations, or registered voluntarily. A public company’s disclosures don’t stop at its initial registration. It keeps filing on a Form 10-K each year and a Form 8-K whenever certain kinds of news happen, precisely so the market has the information it needs to keep re-pricing the stock as circumstances change, rather than pricing it once and leaving that price untouched.
That re-pricing is constant, and it’s the subject of the next article in this path: what actually moves a share price session to session, and how to measure how much it moved.