Micro-cap

A public company with a relatively small market capitalization, typically ranging from $50 million to $300 million.

Micro-cap refers to public companies with a relatively small market capitalization, typically ranging from $50 million to $300 million. This segment sits below small-cap stocks and above nano-caps. Because of their small size, micro-cap companies are often in their early stages of development, operating in niche industries or developing emerging technologies. Investors observe and calculate a company's micro-cap status by multiplying its total outstanding shares by the current market price per share. Because these companies have fewer shares trading publicly and attract very little coverage from Wall Street analysts, they generally suffer from low trading volume and limited institutional ownership. This lack of liquidity means even small buy or sell orders can trigger dramatic price swings. While micro-caps offer significant growth potential and the chance to invest in a company before it scales, they carry substantial risk. They often have limited access to capital, less public information available, and higher failure rates compared to mid-cap or large-cap peers. Investors must also be cautious of the wider bid-ask spreads and potential susceptibility to market manipulation in this tier.

Company A is an early-stage medical device developer with 15 million shares outstanding. Its stock currently trades at $12.00 per share. Its market capitalization is calculated as 15,000,000 shares $12.00 = $180,000,000. Since this valuation falls between $50 million and $300 million, Company A is classified as a micro-cap stock.