There are now 20 total shares outstanding and the new investor owns 50% of the company. Suppose the company then issues 10 new shares and a single investor buys them all. If investors receive voting rights for company decisions based on share ownership, then each one would have 10% control. Therefore, shareholders' ownership in the company is reduced, or diluted when these new shares are issued.Īssume a small business has 10 shareholders and that each shareholder owns one share, or 10%, of the company. ![]() Share dilution happens when a company issues additional stock. It's important for investors to take a closer look at how dilution happens and how it can affect the value of their shares. It is a risk that investors must be aware of as shareholders. ![]() When a company issues additional shares of stock, it can reduce the value of existing investors' shares and their proportional ownership of that company.
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