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Back to Basics: Charting Market Cap and Shares Outstanding

      On October 1st, 2007, Dryships (NASDAQ:DRYS), the world's largest publicly traded dry bulk shipper, traded at $115.50 per share, with a market cap of $4.1 Billion. Today, the company has a market cap of roughly $1 Billion, less than a fourth of its high. Shares of Dryships, however, are down not 75% as one might expect, but instead a jaw-dropping 98%. $10,000 invested in DRYS at its peak would be worth only $200 dollars today! What caused this disparity? Over the same period, the number of shares outstanding of DRYS increased from 35 million to more that 350 million as DRYS issued new shares to raise capital, virtually wiping out the value of previous shareholders. Incredibly, however, ask an investor in DRYS today what its market cap was in 2007 and they are unlikely to have an answer. Indeed, it is not uncommon to see the following logic on message boards: "Once the market turns around, DRYS has the potential to soar again, back up past $20 per share,  like it was before!!!" As the preceding statements indicate, this logic is foolish and dangerous. In fact, of course, DRYS needs only to reach around $12/share to revisit its zenith, which was reached in the heady days of dry bulk when freight rates were many times what they are now. Despite being roughly 1/6th of its all-time high, a $20 share price for DRYS is, thanks to dilution, an utter fantasy barring a miraculous turn of events.
    Amazingly, however, modern free investing sites such as Yahoo! and Google Finance make accessing the data necessary to understand this difficult if not impossible. Here's a quick test: can you find the market cap of U.S. Steel in 2005? How long will it take you? 

     Any luck? Odds are, unless you are far better using Google than I am, you will have some difficulty. Perhaps, if you are lucky, you might find a website the promises the data if you sign up, or pay a monthly fee. More likely than not, you'll end up multiplying shares outstanding data by share price data yourself. It should not be that hard, and it isn't anymore., a new website made by Harvard students, combines freely accessible information to do the math for you, giving you the power to see historical market cap, shares outstanding and price data for any most any stock (the list grows every day). Now, there is no need to trawl through SEC documents looking for shares outstanding, or guess whether or not a company regularly dilutes its shareholders... the information is simply at your fingertips. In many cases, the story is scary. The sharecounts of companies such as U.S. Steel (NYSE:X), Ford (NYSE:F) and Citigroup (NYSE:C) have increased by 60%, 100% and 570%, respectively, over the past decade, leaving shareholders in the dust relative to the value of the company they invested in. For example, since 2002 the value of Ford has doubled to near 40 Billion dollars, but a shareholder holding since then would find his shares down 30%! The lesson is simple: any shareholder holding a stock without monitoring its history of share dilution is setting himself up for disaster, even if the underlying call is correct.
      Thankfully, however, there are happy stories to be found. Many companies, such as Microsoft (NASDAQ:MSFT), Walmart (NYSE:WMT), and Exxon Mobil (NYSE:XOM), have regular histories of buying back shares of their company, returning value and generating returns for individual investors in excess of their market capitilization. In the past 10 years, even though Walmart's market cap has fallen, its shares have still had (slightly) positive returns, outperforming Ford's markedly despite Ford's spectacular increase in valuation. Individual investors of all types would do well to pay attention to these vital types of data, especially now that they are available in such a free and easy way. No matter how you do it, though, keeping tabs on the shares outstanding of companies you invest it is an irreplaceable part of the ongoing due diligence each investor must maintain to have a chance of beating the market... you should always know if the cards are being stacked against you, or if they're tilted in your favor! 

Happy trading,


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.