stock-dilution

Vocabulary Word

Definition

'Stock-dilution' happens when a company issues more shares. This increases the total number of shares, but it decreases the worth of each previously existing share, much like diluting a drink with water.

Examples in Different Contexts

In investment, stock dilution occurs when a company issues additional shares, reducing the ownership percentage of existing shareholders. An investment analyst might say, 'Stock dilution can affect your investment's value, but it may also indicate the company is raising capital for growth.'

Practice Scenarios

Academics

Scenario:

In our next finance class, we're covering the topic of equity dilution and its impacts on investors and companies. It's an important aspect to understand for those interested in entering capital markets.

Response:

I look forward to the lecture on stock dilution. Having a good grasp on such topics is essential to succeed in financial markets.

Business

Scenario:

Our capital needs for the upcoming expansion are enormous. We should discuss possible fundraising strategies.

Response:

One option could be to issue additional shares, although we should consider the impact of stock dilution on our existing shareholders.