Share Dilution

Valuation & Fundamentals

The shrinking of existing shareholders' ownership stake when a company issues new shares and the share count rises.

Stock offerings, shares and options granted to employees, and conversions of convertible debt are the main sources. Because the same profit is split across more shares, earnings per share comes under pressure too.

Example

If a company with 100 million shares issues 5 million new ones, an investor holding 1 million shares sees their stake fall from 1% to about 0.95%.

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