In Star Trek IV: The Voyage Home, the crew of the Enterprise travels back in time and Kirk has to sell his antique eyeglasses to get some much needed 20th century money. He’s offered $100 and asks “Is that a lot?” It’s played for laughs, but Kirk has no way to know what things cost in the 20th century. He’s understandably ignorant of the economics of the 1980s.
Today, a lot of economic terms are thrown around with few people really understanding what they mean. Right-wing media is making a lot of Anheuser Busch losing billions in market cap, claiming that the company is facing disaster.
But I doubt many of the people gleefully pointing to Anheuser Busch’s market cap even know what a market cap is. I wasn’t sure myself, I had to look it up. So let’s first have a discussion of what a market cap is.
“Market cap” short for market capitalisation. Thanks, Mr. Citizen, but what’s that? Good question. Here’s what Wikipedia says:
Market capitalization, sometimes referred to as market cap, is the total value of a publicly traded company's outstanding common shares owned by stockholders.
Market capitalization is equal to the market price per common share multiplied by the number of common shares outstanding. Since outstanding stock is bought and sold in public markets, capitalization could be used as an indicator of public opinion of a company's net worth and is a determining factor in some forms of stock valuation.
When someone presents some phenomenon to you, there are three questions you should ask:
- Does the phenomenon even exist? There is a lot that is simply made up.
- If the phenomenon does exist, it it something significant, or is it just normal variation?
- If something significant is going on, is the cause of it what people claim?
Over the past few days, Anheuser Bush’s market cap has dropped, so it meets to the first criteria. But for the second, we’re at Captain Kirk’s question “Is that a lot?”
On the 5-Day Chart, it sure looks like a big drop doesn’t it? But let’s look at the 3-year chart of get some perspective:
See the little dip at the arrow? That’s the collapse in market cap that the right-wing media is pushing. It’s barely a blip, there are a number of large drops. As far as I can tell, nothing seems to make this drop stand out from any of the others.