Is Market Capitalization Meaningful?

Kip Esquire takes Michael Kinsley to task for being clueless:

So free-market capitalism has decreed three different values for this company [taken private through a leveraged buyout]. One is set by the stock market: the value of all the company's outstanding shares, or "market capitalization." One is what the private investors are offering---usually a bit more than the market cap. And one is what the private investors sell the company for a blink of an eye later---which is usually a lot more than the other two. Which of these numbers is the true capitalist price? Which one represents the most sublime interaction of supply and demand?

That's Kinsley; follow the first link above for Kip's explanation of why he's wrong. All good points, but there's a more fundamental reason why you can't buy up 100% of a company for a sum of money equal to its market capitalization: Demand curves slope downard.

Investors value stocks differently, just as consumers value goods differently. If the market price of a stock is $50 per share, there's a good chance that, say, 20% of the stock will be held by investors who believe that it's really worth at least $60 per share. The market price is the amount that the marginal buyer is willing to pay for a share, not the price at which all shareholders would be willing to part with all their shares (we know by revealed preference that they aren't willing to sell at market price).

Which leads me to wonder: What, if anything, does market capitalization mean? As an estimate of a company's market value, it's biased consistently downward, though by how much I don't know. The only meaningful interpretation I can think of is a lower bound on its market value.

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