Micro-cap stock

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Micro-cap stock

Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Micro-Cap Stock

A stock with a very low amount of market capitalization. In general, a micro-cap company has a market capitalization of less than $250 million, but there is no hard-and-fast rule. Some brokerages or exchanges have slightly different definitions of micro-cap. Some indexes track micro-cap companies. See also: High-cap, Mid-cap, Low-cap.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

Micro-cap stock.

A micro-cap stock is one with a smaller market capitalization -- sometimes much smaller -- than stocks described as small-caps. (Market capitalization is figured by multiplying the current market value by the number of outstanding shares.)

The cut-off for deciding that a stock belongs in one category or the other is arbitrary. However, the capitalization thresholds currently being suggested for micro-caps range from $50 million to $150 million.

Micro-caps are not only the smallest of the publicly traded corporations, but they are also the most volatile. That's partly because they often lack the reserves that may allow a larger company to weather rough periods.

And there are generally relatively few shares of a micro-cap company, so a large transaction may affect the stock's price quite a bit. In contrast, a similar transaction might not affect the stock price of a larger company that had many more shares in the market quite as much.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
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Sharp manages the pounds 62.5m Rensburg UK Smaller Companies Trust and pounds 47m UK Micro Cap Growth Trust since their launch in 1991 and 2002 respectively
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Heffernan's investment career spans a quarter century, including 15 years at Lord Abbett & Co., where he was a partner and portfolio manager of the Lord Abbett Small Cap Value fund and the founding portfolio manager of the Lord Abbett Micro Cap Value fund.