The Broken Small-Cap Market Undermines the Recovery

From Main Street to Wall Street, most conversations about publicly traded companies dwell upon iconic American enterprises such as Apple, Procter & Gamble, and Pfizer. In reading the headlines of most newspapers or listening for a few minutes to any financial TV show, you could easily be excused for thinking that all publicly traded entities are enormous, multinational corporations.

In reality, the overwhelming majority of public companies are small. Nearly eight out of every 10 public companies in the U.S. have market capitalizations (the total value of the issued shares of a public company) of less than $500 million. More specifically, the median equity value of a U.S. company listed on a senior exchange such as Nasdaq is only $418 million, and an eye-opening 40 percent of those companies have market capitalizations smaller than $250 million (PDF), according to recent research from Keating Capital. For comparison, the market capitalization of General Electric is about $250 billion.