Market gearing measures a company's indebtedness using the market value of equity (market capitalisation for listed companies, estimated equity value for unlisted ones) rather than book values. It is theoretically more relevant than book gearing for WACC construction as it reflects financing costs at market prices. For unlisted companies, its estimation is circular (enterprise value depends on WACC which depends on gearing which depends on enterprise value) — resolved by using sector target gearing from listed comparables instead.

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Example: a listed Swiss company presents market capitalisation of CHF 45.0 million and net debt of CHF 15.0 million — market gearing of 33% (15/45). Its book equity is only CHF 18.0 million — book gearing of 83%. The gap reflects the market value premium over book (PBR = 2.5x). For WACC construction, the market gearing of 33% is retained, producing a 75% equity / 25% debt capital structure.

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Hectelion uses market gearing of listed sector comparables to calibrate the target capital structure in every WACC construction for unlisted company valuations.