What is dilution in the context of company valuation?
An example of an AI chatbot conversation about dilution and its impact on company valuation.
What is dilution in the context of company valuation?
Dilution refers to the reduction in ownership percentage of existing shareholders when a company issues new shares. It can affect the valuation of the company.
How does dilution impact my shares if I own 10% of a company?
If the company issues more shares, your 10% ownership could decrease if you don't buy additional shares. This means your voting power and claim on profits may also reduce.
Can you give an example of how dilution works?
Sure! If a company has 1,000 shares and you own 100 shares (10%), and it issues 500 new shares, the total shares become 1,500. Your ownership drops to about 6.67% unless you buy more shares.
What are the different types of dilution?
There are several types, including equity dilution from issuing new shares, convertible securities, and employee stock options. Each can affect existing shareholders differently.
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