What are micro caps?

There is no one standard defining what a micro cap is in Australia. In the US one reference point is the Securities and Exchange Commission, which says the typical definition would be companies with a market capitalisation of less than $US250 or $US300 million.

Locally the S&P/ASX Emerging Companies Index is often used as a proxy for micro caps - but it doesn’t really fit the bill as its largest weightings are in companies with market capitalisations of as much as $750m.

Research house Morningstar defines the Australian micro-cap segment as comprising the bottom three percent of the local market by capitalisation, or companies with a market cap up to $300 million.