Dilution
Dilution occurs when a company issues new stock which reduces an existing shareholder`s percentage of ownership.
Benefits
Issuing new stock can give a company more money to grow. This can lead to a bigger, more successful business in the long run.
Frequently Asked Questions
What is dilution of shareholding of existing shareholders?
Dilution of shareholding means current owners own a smaller part of the company after it issues new shares.
What happens during dilution?
During dilution, a company releases more shares. This lowers the ownership percentage of existing shareholders.
Does a stock split dilute shareholder equity?
No, a stock split doesn`t dilute shareholder equity. It increases the number of shares but keeps the total ownership the same.
Key Takeaway
Dilution reduces the ownership share of current shareholders. Yet, it can be a step towards growing the company.