How and Why of Stock Shares and Dilution

Chapter 22: Getting Financed - Page 22.15

How and Why of Stock Shares and Dilution

Dilution is quite common in sophisticated growth companies because they need to bring in additional investors to finance high growth. The underlying reason goes back to what we discussed earlier in Financial Analysis: Cash is King; growth takes cash, meaning more capital, meaning more investment. The next illustration, taken from the lower half of the Investment Offering table, shows details of dilution.

Details of Dilution

Dilution is a matter of simple mathematics as stock ownership spreads. The ownership associated with each share decreases as the numbers of shares increase. (Note: dollar values are displayed in thousands.)

[Home] [Buy this Book] [Links] [About the Author] [About this Site] [Site Map] [Contact]