Capitalization is an indicator of company’s demand for market investors. Market value is calculated by multiplying the number of shares outstanding by the current market price of a firm's shares.
The capitalization figure is dynamic because share price is dependent on internal and external factors as well. Economic conditions, demand, state policy, brand popularity are classified as external factors, while management decisions, qualification and revenues are internal one.
These factors could be a lever of management and influence on the size of capitalization by artificially over- or underestimation of the company's actual value.
Using Orbis by Bureau van Dijk, Belgian electronic publisher of business information, the Credinform experts made TOP-10 of companies all over the world by the level of capitalization (Table 1).
Number one is Apple. At the beginning of August 2018, its NASDAQ value amounted to 1 tln USD and made the company the most expensive business.
According to the ranking, 7 out of 10 top companies are representatives of American business giants, mostly engaged in IT sector. However, there is an exception – Exxon Mobil, which carries out extraction and processing of key product for all companies in the ranking. The largest American oil corporation is estimated at 344 bln USD. This figure is significantly lower than capitalization of companies engaged in providing services or manufacturing of customer-related product.
Many economists note that capitalization of all listed companies is overestimated and further increase stimulating could lead to dotcom crash as it has happened with NASDAQ in the early 2000s.
|№||Company||Capitalization, bln USD||Assets, bln USD (for 2017)|
|6||Exxon Mobile (USA)||344||348|
|7||Samsung Electronics (South Korea)||269||281|
Source: Orbis database by Bureau van Dijk
There is a completely different situation among Russian listed companies. The state participates in capital of 9 out of 10 enterprises, and their activity is related to industrial production: oil and gas extraction, production of metals. All companies in the ranking are engaged in manufacturing of essential products, are world-famous and lead in the international market. However, their total capitalization is roughly equal to the capitalization of Exxon Mobile alone.
The most expensive domestic corporation is JSC Rosneft (Table 2): its value is estimated at 72 bln USD. The second is JSC Lukoil, the most efficient oil company by "earnings-net profit" figures in Russia. By the way, Tesla Motors, one of the most ineffective international American businesses for the last 15 years, has 63 bln USD capitalization. Its revenue is less than that of Magnit retail chain (JSC Tander), which operates only in the Russian Federation. In addition, throughout its history, Tesla did not bring in profit to its investors, and the loss in 2017 amounted to the maximum anti-record - almost 2 mln USD.
JSC Gazprom, having 12%-share in the world's gas production and one of the most important strategic partners for Europe and the rest of the world, has a capitalization of 53 bln USD, with a total asset value of 317 bln USD.
|№||Компания||Капитализация, млрд. USD||Активы, млрд USD(за 2017 год)|
|5||JSC MMC Norilsk Nickel||27||16|
|7||JSC Gazprom neft||24||50|
Source: Information and Analytical system Globas by Credinform
Obviously, the market value of domestic enterprises is underestimated and does not reflect the real situation.
The formula for calculating market capitalization does not take into account the non-financial aspect – publicity of brand, which can be estimated not by financial indicators, but through innovation, advertising and marketing. Listed enterprises engaged in extraction of minerals or industrial production are classified as strategically important objects. Being monopolists in their business, they cannot conduct aggressive advertising or marketing policies.
Overestimated capitalization of servicing and IT companies is a worldwide trend. Through local innovations, aggressive advertising and strong marketing, corporations create a buzz around their brand, thereby stimulating a speculative process that over- or underestimates the company's actual value.
Since August 1, 2018 the Federal Tax Service (hereinafter “the FTS”) has launched “Transparent business” project involving disclosure of companies’ data not of tax secrecy.
The regime of tax secrecy on information about companies, available for the FTS, was withdrawn on the basis of Cl. 1.1 Art. 102 of the Tax Code of the Russian Federation (as amended by the Federal Law No. 243-FL of July 3, 2016). In this regard, the authority has an obligation to approve the terms and period of data placement, and then start publishing.
The approval of the terms and period for publishing was based on the FTS Order No. MMV-7-14 / 729 @ of December 23, 2016 (as amended on May 30, 2018). The stages of publication of information not of tax secrecy on the website of the Federal Tax Service are presented in Table 1.
|August 1, 2018||- special tax regimes;- participation in the consolidated group of taxpayers;- average number of employees.|
|October 01, 2018||- paid taxes (fees, dues);- amounts of income and expenses according to the financial accounts.|
|December 01, 2018||- data on taxes, penalties and fines arrears;- offenses and measures of responsibility for them (decisions on bringing to responsibility, which entered into force during the period from June 2, 2016 to December 31, 2017, but only if the company did not pay the fine before October 1, 2018).|
|December 01, 2019||- data on insurance contributions arrears.|
Open data on most business associations and societies were placed according to the schedule. In 2020, information on other organizations, including strategic enterprises and joint-stock companies, organizations of the defense industry complex, and the largest taxpayers will be published.
Up-to-date information, previously considered as of tax secrecy, is already available for Globas users. In the section “Key financial and economic indicators” of the report, information on application of special tax regimes (on 2 million companies), the average number of employees (on 2,5 million companies) and information on participation in the consolidated group of taxpayers (on 88 companies) is presented as of December 31, 2017.
The innovation will allow more detailed verification of counterparties and assess risks, exercising due diligence and carefulness before concluding contracts.