Corporate actions
Dilution
The reduction in your ownership share when a company issues new shares.
How it works
Issuing shares to raise money, pay staff or fund acquisitions increases the share count, so each existing share owns a smaller fraction of the company.
Dilution is not automatically bad. Capital raised at a good price and invested well can leave everyone better off; it is dilution without a return that destroys value.
Worked example
Owning 1% of a company with 100 million shares means holding 1 million. After 20 million new shares are issued, the same holding is 0.83%.
Related terms
- Shares outstandingThe total number of a company’s shares currently held by all its investors.
- Share-based compensationPaying employees in shares or options rather than cash.
- Rights issueAn offer letting existing shareholders buy new shares at a discount, in proportion to their holding.
- Share buybackA company buying its own shares in the market, reducing the number in issue.
- Earnings per shareNet income divided by the number of shares — the profit attributable to each share you own.
Mentioned in
More in Corporate actions
- Dividend cover
- Delisting
- Dividend cut
- Corporate action
- Dividend reinvestment
- Consensus estimate
- Dividend yield
- Analyst rating
All 26 Corporate actions terms · The full glossary, 433 terms
Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.