What does dilute mean in stocks?
When a company issues new shares of stock, it can dilute the existing shareholders. Dilution is the percentage of a company’s outstanding shares that are issued in a given period. So, when a company issues new shares, existing shareholders' proportionate share of the company's ownership becomes smaller. This is the opposite of what a company growth-motivated investor hopes for.
What does diluted mean in investing?
When you invest in a stock, there are a number of outstanding shares in the company. If you own one share of a company, the company has 100 shares outstanding. If you own 10 shares, you own 10% of the company.
What does diluted mean in terms of share price?
If a stock is 100 shares, and someone buys 10 more shares, the company would have 10% more shares but would only own 10% of the company. The remaining 90% would still be owned by the original shareholders. Thus the price per share would drop to 90% of what it was before the investment. The total value of the company would be the same, but the new investor would own less than before. That’s why when share prices decrease very rapidly in a short time,
What does diluted mean in the stock market?
The stock market is made up of the shares of companies. There are millions of shares in each company. When a company issues a lot of stock, the number of shares outstanding (or shares that are given out) is lower than the amount of money raised in the initial public offering (IPO). The sum of the money raised is the company’s capitalization.
What does diluted mean in terms of stock price?
The stock price of a company is the price at which investors buy or sell shares of that company. When a company’s outstanding shares are more than the number of shares that are outstanding at the last recorded financial statement, shareholders get ‘diluted.’ For example, if there are 10 shares of a stock that are outstanding, and the stock splits, then the number of outstanding shares will grow to 11.
