A company makes new shares and sells them. There are more slices of the same cake, so your slice gets smaller.
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A company makes new shares.
Then it sells them to get money.
That is dilution.
To pay bills, pay staff or fund new work. Small companies often have little cash, so they sell shares instead of borrowing.
It is legal, and it has to be written down in a filing at the SEC. That filing is what the Desk reads.
The company sets a price for the new shares.
Say stock XYZ is $1.25.
New shares are sold at about $1.25.
In the filing. A 424B5 prospectus says how many shares and at what price.
The price is often a bit below where the stock is trading, so buyers take them.
Traders buy shares at $1.25.
Most do not know they are new.
Now the selling has started.
You bought at $1.00. Back then there were 10 shares.
People buying at $1.25 now are buying brand-new shares, not the old ones you saw.
Before: 1 of 10 shares. That is 10%.
After: 1 of 20 shares. That is 5%.
You did nothing, but you own less.
Same one share. Twice as many shares in total. Your part of the company is half what it was.
More shares are for sale.
The number of buyers stays the same.
To sell them all, sellers drop the price.
10 people want a cake slice. There were 10 slices. Now there are 20.
To get rid of the extra 10, the baker has to make them cheaper. Lots of new shares often push the price down. Not always: news and buyers can push it up too.
The company sells new shares a few at a time, to whoever is buying, at today’s price.
Someone lent the company money. They swap the loan for new shares, often cheaper than the market.
A ticket to buy a new share later at a set price. When it is used, new shares are made.
One investor buys new shares a bit cheaper, then sells them in the market.
A private placement: a few investors buy a block of new shares at once, often at a discount and often with warrants. A resale filing later lets them sell.
ATM and equity lines can sell on any trading day once the paperwork is in place.
Conversions and warrants wait for the holder to choose, often when the price is right for them.
Each one has its own long lesson below, taught by Adam.
A red meter means lots of new shares could come.
An open selling window means they can sell today.
Read the filing first.
More lit symbols means more to read before you do anything. See the three steps on Dilution impact
your share new shares other shares · tap + for more · arrow keys work too
Each one: the word, a picture, the steps, a sum to work out, where to spot it, a quick check.
New shares sold a little at a time, at today’s price.
A loan swapped for new shares, often below the market.
Tickets to buy new shares at a set price.
One investor buys on demand, then sells on.
A few investors buy a block at once, then sell after the resale filing.