Dilution
The reduction in an existing share's proportional claim after new shares or convertible instruments are issued.
Plain languagePractical exampleConnected reading
01
What is it?
The reduction in an existing share's proportional claim after new shares or convertible instruments are issued.
02
Why does it matter?
It can change earnings per share, voting power and valuation even if the company grows.
03
How should it be read?
Review new share count, issue price, use of proceeds and diluted EPS.
04
Common mistake
Assuming dilution has no cost because the company receives cash.
A simple example
If share count rises 20% while profit is unchanged, EPS falls about 16.7%.