3rd Dec 2009 by Gary
Stock dilution is when owners of a stock have their level of ownership decreased based on several potential factors. This has an adverse effect because the value of the holding in the company of the investor is decreased. A number of companies have what are called anti-dilution provisions which protect against this, but not all do. The most well-known form of stock dilution is when a company simply makes a secondary offering, which dilutes the value of the stock. This is why shareholders resist when companies raise money by issuing more common stock, causing the value of the stock in the company to go down.
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