Foreign media commentary suggests that markets often interpret "a company losing tens of billions of dollars in market capitalization" as the company actually losing an equivalent amount of cash, but this is inaccurate. Market capitalization is determined by share price and the number of outstanding shares; after a marginal price change, the overall valuation can be rapidly recalculated.
Nike's market capitalization has significantly declined
Using Nike as an example, the article states that the company’s market capitalization was approximately $264 billion at the end of 2021 and had declined to about $57 billion by September 2026, representing a cumulative reduction of over $200 billion. However, its revenue over the past 12 months remained around $46.4 billion, roughly flat year-over-year.
This indicates that the market's downward adjustment reflects not only a reassessment of current sales but also lower expectations for future growth, profit margins, and the competitive landscape. The article notes that Nike's price-to-sales ratio has declined from approximately 4.0 times in fiscal year 2022 to around 1.2 times currently, with significant contractions in its price-to-book and price-to-earnings ratios as well.
Marginal trades determine the total market capitalization.
The article states that a change in market capitalization does not require an equivalent amount of capital to actually leave the market. If a company's stock price falls, the latest trading price directly reduces the valuation of all outstanding shares, allowing market capitalization to shrink significantly in a short period of time.
This does not mean the company's account has lost an equivalent amount of cash, nor does it indicate that investors actually sold shares of the same size. Market capitalization is essentially the market's overall valuation based on the latest price.
This logic also applies to the crypto market.
The article points out that changes in the market capitalization of crypto assets follow the same logic: after price increases or decreases, the total market capitalization calculated by circulating supply expands or contracts accordingly, but this does not equate to an equivalent amount of actual funds entering or leaving the market.
The text also notes that evaluating the value of a company or an asset should not rely solely on market capitalization. Revenue, profits, cash flow, and enterprise value—taking into account debt and cash—are often better indicators of operational performance and financial structure.