does market cap include preferred stock

Market capitalization and preferred stock

As an investor or analyst you may ask: does market cap include preferred stock, and why does it matter? This article answers "does market cap include preferred stock" early, then explains the definitions, common conventions, practical calculations, treatment of hybrid securities, and how different data providers report market-cap figures. By the end you will know when to treat market capitalization as common-equity only and when to add preferred stock to measure total equity claims.

As of 2026-01-22, according to coinpedia.org, cryptocurrency markets showed notable volatility: total crypto market value fell to about $3.04 trillion after a roughly 3% decline in 24 hours. That market snapshot illustrates why clarity about how a market value is defined matters across asset classes—whether discussing token market caps or corporate equity. (As a reminder, this article focuses on corporate market capitalization and preferred stock treatment.)

Definition of market capitalization

Market capitalization, in its canonical and most common form, equals the current market price per common share multiplied by the number of common shares outstanding. Formally:

• Market capitalization = Share price × Shares outstanding (common shares)

This measure provides a quick estimate of the market value of a company’s common equity and is widely used for classification (small-, mid-, large-cap), index weighting, and many valuation comparisons. However, conventions vary: some definitions and data vendors measure common-equity market cap only; others calculate broader equity market value that includes multiple classes of stock such as preferred shares.

Types of market-cap metrics and related terms

Basic (total) market capitalization

The basic or simple market capitalization uses total outstanding shares of a specified class multiplied by the current trading price for that class. When applied to common stock, the formula is common share price × common shares outstanding. Conventions vary about whether different equity classes—such as preferred stock or multiple common classes—are included in an aggregate market‑cap figure. Always confirm the scope (which share classes) when using a reported market-cap number.

Free-float market capitalization

Free-float market capitalization adjusts the basic market-cap measure by excluding shares that are not readily tradable: locked-up shares, restricted shares, treasury shares, or strategic stakes that index providers or data vendors consider not part of the investable float. Free-float calculations are commonly used by index providers and ETFs to set investable weights that better reflect market liquidity and investability.

Implied equity market cap vs. enterprise value

• Implied equity market cap generally refers to the market value attributable to a company’s ordinary (common) shareholders—the same as the common-only market cap.
• Enterprise value (EV) is a capital-structure inclusive measure that attempts to capture the entire market value of a company’s operating assets, independent of financing choices. A typical EV formula is:
  • Enterprise value = Equity market value (common) + Market value of preferred stock + Total debt (net of cash) + Minority interest - Excess cash

Because EV explicitly aggregates claims beyond common equity, many practitioners add preferred stock (by market value) to EV. That distinction helps explain why some measures include preferred while others do not.

What is preferred stock?

Preferred stock is a hybrid security with features of both equity and debt:

• Fixed or stated dividends: Preferred shares often pay regular dividends at a fixed rate, similar to interest on debt.
• Preference in liquidation: Preferred holders generally receive liquidation proceeds before common shareholders, but after secured creditors.
• Limited or no voting rights: Preferred shares commonly lack the voting power of common stock.
• Convertible features: Some preferred shares convert into common shares under specified conditions.

Economically, preferred stock sits between debt and common equity: it represents an ownership claim (equity) but often with fixed cash flows and seniority that make it behave like debt for many analytical purposes.

Common conventions: Does market cap include preferred stock?

Short answer: it depends. The phrase "does market cap include preferred stock" often yields two different but defensible conventions in practice.

1. Most common practice — market cap refers to common-equity only:

   • In many financial references, market capitalization means the market value of common equity: common shares outstanding × common share price. Index methodologies, equity screens, stock exchanges, and many data vendors report market cap in this way because common equity is the relevant basis for most equity investors and index weights.

2. Exceptions and alternate definitions — aggregate or "total equity" market cap:

   • Some providers or analysts compute a total market capitalization that sums the market values of all equity classes outstanding, including preferred shares and multiple common classes. This is sometimes labeled "total equity market value" or similar, and it answers a slightly different question: what is the market value of all outstanding equity claims?

3. Specialized measures and enterprise-value conventions:

   • Certain sectors and measures (for example, REIT implied equity market cap or enterprise-value metrics) explicitly exclude or include various hybrids differently. Enterprise-value style calculations typically add preferred stock to debt-like claims because preferred represents a senior claim on cash flows.

Because reputable sources differ, the responsible approach is to check how a given data provider defines "market capitalization" before relying on the number.

Why practices differ — rationale for excluding or including preferred

Reasons to exclude preferred from reported market cap:

• Economic behavior: Preferred stock often pays fixed dividends and has priority over common in liquidation, so it behaves more like debt in many financial analyses.
• Investor focus: Common equity is what ordinary equity investors trade and what standard equity multiples (P/E, price-to-book for common equity) measure.
• Indexing conventions: Many indices and analytics tools focus on common-equity investability and free-float of common shares.

Reasons to include preferred in a total-equity market cap:

• Equity claim completeness: Preferred stock is legally equity and represents an ownership claim with market value; adding it yields the market value of all equity holders.
• Capital structure clarity: For some valuation uses—particularly when reconciling to enterprise value or when assessing total claims on corporate assets—counting preferred improves consistency.

Both positions are defensible depending on the question being asked. The key is to be explicit: define whether you are reporting common-equity market cap or total equity market value that includes preferred stock.

Treatment of convertible and other hybrid instruments

Convertible preferred shares, convertible debentures, stock warrants, and options complicate the picture:

• Convertible preferred: If preferred shares are convertible into common, analysts may include them in a diluted share count if conversion is likely (for example, if the conversion is in‑the‑money) or under standardized diluted-share accounting conventions. Some implied-equity measures exclude convertible preferred from preferred totals because their ultimate claim is common stock post-conversion.

• Warrants and options: These are typically reflected through diluted share calculations using the treasury-stock method or other standard dilution formulas. If you compute a fully diluted market capitalization, you should reflect the likely post-exercise common-share count.

• Hybrid securities and mandatory convertibles: Treatment depends on contractual terms and whether conversion is probable. Many analysts present both basic and fully diluted market-cap figures to show the range.

As a rule: document whether convertible preferred and other potential common shares are included and the assumptions used for dilution.

How to calculate market capitalization depending on your goal

Market cap (common-only)

Formula:

• Market cap (common-only) = Common share price × Common shares outstanding

When to use it:

• Comparing listed companies on a like-for-like basis for equity investors.
• Calculating common-equity valuation multiples (e.g., P/E, price-to-book for common).
• Assigning index weights that are based on common free-float.

Market cap including preferred (total equity market value)

Formula:

• Total equity market value = (Common share price × Common shares outstanding) + (Preferred share price × Preferred shares outstanding)

When to use it:

• Measuring the market value of all equity claims for enterprise-value reconciliation.
• Evaluating claims on residual corporate assets where preferred is non-trivial.

Note: If preferred is not exchange-traded, use the latest market transaction, fair-value estimate, or book value as an approximation, and disclose the approach.

Enterprise value (when you need a capital-structure inclusive measure)

Concise EV formula:

• Enterprise value = Equity market value (common-only) + Market value of preferred stock + Market value of debt + Minority interest - Cash and cash equivalents

When to use EV:

• Comparing companies with different capital structures.
• Valuing a business independent of financing choices.
• M&A analysis and credit assessment.

Because EV explicitly adds preferred, it is a common place to see preferred included as a separate item even if headline market-cap figures exclude preferred.

Practical examples

Example company summary (numbers simplified):

• Common shares outstanding: 100 million
• Common share price: $10.00
• Preferred shares outstanding: 5 million
• Preferred share price: $25.00
• Total debt (market value): $150 million
• Cash: $20 million

Calculations:

1. Market cap (common-only):

• 100,000,000 × $10.00 = $1,000,000,000 (USD 1.00 billion)

1. Market value of preferred:

• 5,000,000 × $25.00 = $125,000,000 (USD 125 million)

1. Total equity market value (common + preferred):

• $1,000,000,000 + $125,000,000 = $1,125,000,000 (USD 1.125 billion)

1. Enterprise value (simple):

• EV = Equity market value (common-only) + Preferred + Debt - Cash
• EV = $1,000,000,000 + $125,000,000 + $150,000,000 - $20,000,000 = $1,255,000,000 (USD 1.255 billion)

Interpretation:

• If you use headline market cap (common-only), you would report $1.00 billion.
• If you need the market value of all equity claims, include preferred for $1.125 billion.
• For capital-structure neutral comparisons, use EV at $1.255 billion.

This numeric example illustrates why the question "does market cap include preferred stock" matters: different denominators change valuation multiples and comparability.

How major data providers and index methodologies treat preferred stock (practical guidance)

Data vendors and index providers do not all use the same definition. Typical practical guidance:

• Many stock exchanges and mainstream financial data feeds report market cap as the market value of common equity only.
• Index providers often use free-float common shares for weights and will document treatment in methodology papers.
• Some vendors provide separate fields for "market cap (common)" and "total market value of equity (including preferred)"; others provide only one headline measure—so always read the vendor glossary.

Best practice: when using third-party data, consult the vendor’s methodology page or data dictionary and record which market-cap definition you are using. If you are sharing results, label the metric clearly (for example, "Market cap (common equity)" or "Total equity market value (includes preferred)").

Implications for investors and analysts

Including or excluding preferred stock affects several common analyses:

• Valuation multiples: Multiples that use market cap as the numerator (e.g., market cap / revenue) change if you add preferred. If preferred is material, comparing multiples across companies requires consistent definitions.

• P/E and earnings-based metrics: P/E ratios typically reference common equity market cap because earnings available to common shareholders are the relevant denominator. Including preferred without adjusting earnings would distort per-share metrics.

• Index weights and portfolio construction: Indices that rely on free-float common market cap will weight differently than those that use total equity market value.

• M&A and credit work: For enterprise-value oriented work, analysts routinely add preferred to debt-like claims; for takeover price discussions, acquirers consider all outstanding securities and their liquidation or conversion effects.

Recommended practices:

• Use consistent definitions across comparables.
• Prefer enterprise value for capital‑structure neutral comparisons.
• Where preferred is meaningful, present both the common-only market cap and the total equity market value and explain the difference.
• Document whether convertible preferred and dilutive securities have been included in any diluted or implied metrics.

Note: This article does not provide investment advice. It clarifies measurement conventions to help informed analysis.

How to verify treatment for a specific company

Steps to verify whether a reported market-cap figure includes preferred:

1. Check the data provider or index methodology documentation for the definition of market capitalization used.
2. Review the company’s latest annual report, proxy statement, or Form 10-K/10-Q for the number of common shares and preferred shares outstanding and for disclosure of convertible instruments.
3. If preferred is traded, find the preferred share market price; if not traded, use the company disclosures, recent transactions, or fair-value estimates.
4. Recalculate both common-only and total-equity market values and compare with the vendor’s headline figure to deduce which definition they used.
5. For diluted metrics, check the company’s diluted share count and the accounting notes explaining the approach.

When in doubt, contact the data provider or include a clear footnote explaining assumptions.

Treatment for specific situations: REITs, BDCs and regulated issuers

Certain industries have standard conventions for implied equity market cap and for how preferred is treated:

• REITs and some regulated issuers sometimes use an implied equity market cap that focuses on common equity only, or that treats convertible and preferred differently; specialist guides from industry bodies often clarify conventions.
• Business development companies (BDCs) and real estate investment trusts (REITs) may have preferred issuance that is economically significant; industry guidance often instructs analysts to add preferred when computing enterprise value or total equity claims.

Always consult industry-specific guidance (for example, REIT-focused notes) to ensure consistent application.

Summary / Recommended convention

Short takeaway: by default, treat "market capitalization" as common-equity market value (common shares outstanding × common share price) unless the source explicitly states otherwise. Use the following rule-of-thumb:

• If you are comparing public-equity metrics or using standard equity multiples, use common-only market cap.
• If you need the market value of all equity claims or are reconciling to enterprise value, add preferred by market value to obtain total equity market value.
• For capital-structure neutral analyses use enterprise value, which typically includes preferred as a separate claim.

Always disclose the definition used and any assumptions about convertible securities or untraded preferred shares.

Further reading and references are below.

References and further reading

Sources and authoritative references used to compile this article include regulatory and market education materials, financial glossaries, and industry notes. When using third-party data, check the provider’s methodology for the specific definition of market capitalization.

• FINRA market cap explainer (market-structure and definitions)
• Investopedia market capitalization and preferred stock entries
• Fidelity educational pieces on share classes and market-cap calculations
• BDC and REIT industry notes on preferred stock and implied equity market cap
• Nareit notes on implied equity market cap for REITs
• Financial Edge materials on market capitalization and enterprise value

As of 2026-01-22, according to coinpedia.org, cryptocurrency market capitalization fell to roughly $3.04 trillion after a short-term drop of about 3%—an example of why precise definitions of "market cap" are important across asset types.

Practical next steps (for Bitget users and analysts)

• If you track equities and tokenized assets on Bitget, confirm whether a displayed market-cap field refers to common-only market cap or a total-equity figure in any listings or analytics.
• For wallets and holdings that include tokenized equity or hybrid assets, use Bitget Wallet for secure custody and record-keeping of assets and note how the platform labels market values.
• When building models, include both common-only and total-equity market values as separate rows and label them clearly.

Explore Bitget’s tools and Bitget Wallet to monitor market metrics and holdings with clear definitions for each displayed metric. Learn more about Bitget’s market data standards in the platform’s documentation and analytics panels.