Market capitalization (market cap) is the total market value of a company's outstanding shares. The calculation is simple: Market Cap = Current Share Price × Total Shares Outstanding. If a company has 100 million shares trading at 50 EGP each, its market cap is 5 billion EGP. Market cap is the market's assessment of a company's total equity value and is the primary way companies are categorized by size.
In the Egyptian market (EGX), company size classifications: Large Cap (above 10 billion EGP) — these are the most liquid, stable companies that form the backbone of EGX30. Examples include CIB (COMI), Eastern Company (EAST), and Telecom Egypt (ETEL). Mid Cap (1-10 billion EGP) — growing companies with reasonable liquidity, often found in EGX70. Small Cap (below 1 billion EGP) — smaller, potentially higher-growth but less liquid companies. These classifications shift over time with market conditions.
Free float is the portion of shares actually available for public trading. It excludes shares held by controlling shareholders, government entities, strategic investors, and locked-up shares. Free Float = Total Shares - Restricted Shares. A company with 100 million total shares but 60 million held by a controlling family has a free float of 40 million shares (40%). Free float market cap = Share Price × Free Float Shares. EGX30 weights companies by free float market cap, not total market cap.
Why free float matters: Low free float stocks (below 20%) can be manipulated more easily because fewer shares need to trade to move the price significantly. They also have wider bid-ask spreads and higher volatility. For large institutional investors, low free float means they cannot build a meaningful position without moving the market. FoudaLens flags low free float as a risk factor in its analysis.
Large cap characteristics: More stable, lower volatility, better analyst coverage, higher dividend yields, and more institutional ownership. They are the "safe" part of a portfolio but typically offer lower growth potential. In Egypt, large caps are also more insulated from currency fluctuations due to their diversified business models.
Small cap characteristics: Higher growth potential, higher volatility, less analyst coverage, lower liquidity, and wider bid-ask spreads. Small caps on the EGX can offer exceptional returns but carry significant risks — including the risk of being unable to exit a position quickly. Some small caps trade only a few hundred thousand EGP per day, making them unsuitable for larger portfolios.
Portfolio sizing by market cap: A balanced Egyptian portfolio might allocate 50-60% to large caps for stability, 25-35% to mid caps for growth, and 10-15% to small caps for high-growth potential. The exact allocation depends on your risk tolerance, investment horizon, and liquidity needs. Avoid concentrating too much in small caps — their illiquidity can become a serious problem during market downturns when everyone tries to sell simultaneously. This is not financial advice.
This content is for educational purposes only and does not constitute financial advice. Always do your own research before making investment decisions.