# Market Cap lower than Shares Outstanding x Share Price?

Why would the market cap for a company be lower than its shares outstanding x share price?

Example:

Meggitt trades at 544 a share with shares outstanding of 801,960,000.

Their market cap is 4.37 billion but their enterprise value is 441.94 billion.

http://finance.yahoo.com/q/ks?s=MGGT.L+Key+Statistics

The definition of market cap is exactly shares oustanding * share price, so something is wrong here.

It seems that the share price is expressed in pence rather pounds. There's a note at the bottom:

Currency in GBp.

Note the 'p' rather than 'P'.

So the share price of '544' is actually 544p, i.e. £5.44. However it's not really clear just from the annotations which figures are in pence and which are actually in pounds. It seems that the market cap is in pounds but the enterprise value is in pence, given that 4.37 billion is about the right value in pounds whereas 441 billion only really makes sense if expressed in pence.

It looks like they actually got the enterprise value wrong by a factor of 100. Perhaps their calculation treated the share price as being denominated in pounds rather than pence.

• I had to reread a couple times to figure out what you are saying: the stock price is 544 pence per share (if you click "Summary" on the page linked in the question, the fine print at the bottom says "Currency in GBp", not "GBP"). Non-UK readers like me may not expect this. So the market cap is in fact 4.37 billion pounds. Commented Apr 27, 2015 at 1:44
• @NateEldredge thanks for the comment, I rewrote the answer a bit to make it hopefully clearer Commented Apr 27, 2015 at 5:08
• this is why GBX is better than GBp IMNERHO Commented Sep 15, 2015 at 10:30

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.