Quick Definition

Dilution occurs when a company issues new shares, reducing the ownership percentage of existing shareholders.

Examples

• 1A company issues 100,000 new shares in a secondary offering, diluting the ownership of existing shareholders.
• 2A startup grants additional stock options to new employees, which dilutes the stakes of earlier investors.
• 3Through a convertible debt agreement, creditors convert their loans into equity, increasing the total number of shares and diluting the ownership of existing shareholders.

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