Language is an anarchy. While there are written definitions that help, people have their own internal definitions and some use free-market and capitalism differently. In any discussion if you define what you mean by a term then we can possibly avoid talking past each other.

You didn't ask for a lecture so I won't give one. I'll just say I completely disagree with you on "100% free markets" leading to what you describe. I also do not think we have extreme capitalism. Extreme capitalism would basically be a completely free market which we do not have. Every business is highly regulated and taxed. And as you stated the agencies that are supposed to "keep them in check" are captured or tricked into playing their game. Now I don't think this is true of the small cap companies. That's one reason they are suffering and the large companies are suffering less. The centralization of control (regulation) creates incentives to capture those running the reg agencies. So in fact if you make more regulation you just increase the incentive for corruption. So less extreme capitalism would not look all that different.

I don't think there is a simple answer to why all these small companies are unprofitable but the beset one I've heard is that we are in a recession that is a consequence of cheap money monetary policies on top of the consequences of a global shutdown of trade by governments in response to the pandemic. Companies have over extended themselves because the credit markets are rigged by the central planners (FED). So the natural signals that would occur from lenders are gone.

The other factor is that due to the debasement of the fiat currencies and the governments push to get everyone into the stock market as a savings vehicle the stock market drives many businesses. They are being driven by very short sighted (high time preference) 3 month targets instead of longer term health for their businesses. We are all affected by the melting ice cube of the fiat money our economy runs on.