To paraphrase a great sword fighter, “I don’t think it means what I think it means.”

Consider the following thought experiment:

Imagine a stock that issued 100 shares for $100 each 100 years ago. No one then buys or sells for 100 years. The market cap for the last 100 years works out to $10,000 (100×100).

Today someone sells 1 share for $1,000,000. Suddenly, the market cap is automatically calculated as, $100,000,000. Even though the real amount of money invested is only: $1,009,900.

Now if you could “prove” that there were 99 other people foolish enough to spend $1m per share, the market cap makes sense. But I don’t think we can say that *a priori.*

If we computed prices as the average of the last *n* shares bought (where *n* is the number of shares outstanding). I think we’d have a clearer picture of value.

In the above example, we would say that resulting market cap was only: 1,009,900, and therefore the correct price per share is: 1,009,900/100 = 10,099. Which seems like a much more defensible position in terms of pricing.