Jeff Bezos Amazon Company becomes the first company in history to lose $1 trillion market capitalisation

Tags: Economy/Finance International News

Jeff Bezos’s company Amazon has become the first publicly listed company in the world to lose a trillion dollars in market value as a combination of fear of recession, rising inflation, tightening monetary policies and slowdown in the earnings updates triggered a historic selloff in the stock. 

Shares in the e-commerce and cloud company have been declining in October and November month pushing its market value to about $879 billion from a record close at $1.88 trillion in July 2021. 

The Big five Tech companies of America, Intel, Microsoft, Alphabet (owner of Google),Meta (formerly Facebook) and Amazon share prices are falling in the United States as their growth prospects look uncertain in an economy plagued by fear of recession.

The top five US technology companies by revenue have lost nearly $4 trillion in market value this year. 

In October 2022, Amazon projected the slowest revenue growth for a holiday quarter in the company’s history as shoppers reduce their spending in the face of economic uncertainty. That sent its market value below $1 trillion for the first time.

What is Market capitalisation or M-cap?

Market capitalisation refers to the total number of free floating shares of a company in the market multiplied by the current market price of each share.

Explanation 

Suppose there is a company called Tata motors and its promoter is Mr Ratan Tata. The company has 100 shares and all the shares of the company are with Ratan Tata. Ratan Tata decides that he needs money. He decided to sell 20 shares of Tata motors to the public through the Tata Motors Initial Public offering (IPO) at Rs 10 per share. People will buy the shares and the Tata motors company will be listed on an Indian Stock Exchange like BSE after the completion of the process. 

Now Ratan Tata has only 80 shares of the company.

Keep in mind only 20 shares of the company will be listed on BSE as the company has sold only 20 shares to the public.  In Stock market language it will be said that the Tata motors free float is 20 shares not 100.

Now suppose the price of the Tata motors in the market is Rs 100 then the Market capitalization of the Tata Motors will be: Free floating share of the company X market price of the company’s single share.

Thus it will be 20X Rs 100= Rs 2000 

Types of Market capitalisation 

In India on the basis of market capitalization companies are classified into Large Cap, Mid-Cap and Small Cap. Here cap means capitalisation.

Publicly listed companies which have a market capitalization of Rs 20,000 crore or more are called as Large Cap companies.

Mid-Cap: Publicly listed companies which have a market capitalization of less than Rs 20,000 crores and up to Rs 5000 crore.

Small Cap: Publicly listed companies which have a market capitalization of less than Rs 5,000 crores.