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Questions tagged [dilution]

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120 votes
7 answers

Why is stock dilution legal?

What I always heard, since I was a child, was that if you own a stock share, you actually own a small share of a company. That seems to be the general consensus of what a stock share is. Well, that ...
lvella's user avatar
  • 1,347
40 votes
6 answers

What stops management from just "compensating" themselves by taking all the stock in a company?

One of the odd things about a lot of modern companies is that the management, meaning the senior officers (CEO, CFO, CTO, etc) can pay themselves in stock. For example, Square's Jack Dorsey pays ...
Five Bagger's user avatar
  • 9,785
14 votes
3 answers

Greedy shareholder that does not want to dilute his portion [closed]

What needs to be done or could be done if a company wants to raise capital and one of the shareholders doesn't want to dilute his shares and brands all the others as "too greedy". The shareholders ...
M.J.P's user avatar
  • 197
6 votes
2 answers

Will a company's stock price be affected when warrants are issued, or exercised?

A company has 500 million outstanding shares, and it issued 100 million warrants 10 years ago. Assume that none of the warrants has been exercised yet. If tomorrow all the holders exercised their ...
Nathan's user avatar
  • 233
5 votes
1 answer

What's to prevent majority shareholders in a company from dilluting a convertible note?

A company issues a convertible bond to an investor. It has a par value of $10,000 and can be converted into 5 shares. The company currently has 50 outstanding shares, so the bond corresponds to ~9% (...
Soggiorno's user avatar
  • 161
4 votes
6 answers

How much is a founder allowed to dilute stock? [closed]

I am 9 days away from completing a contract for a new start up that still has yet to raise money. At the beginning I negotiated 1% of the company, and a month into the contract he incorporated the ...
jdbriner07's user avatar
3 votes
1 answer

Why isn't newly raised cash priced-in after a secondary stock issuance?

I'm an owner in $HUT8. Yesterday after market close they announced a secondary offering of 15% of the shares. I understand this is dilutive for the shareholders, and today it seemingly led to a drop ...
Ansjovis86's user avatar
3 votes
1 answer

Can Directors issue themselves shares during raise?

I was wondering if it is legal for company directors that also work and operate the business to gift themselves shares during a capital raise in order to retain their controlling interest in the ...
Matthew's user avatar
  • 31
2 votes
1 answer

How does dilution work?

Round 0 Owner 1: 500k shares (50%) Owner 2: 500k shares (50%) Round 1 (Company raises a $5 million Series A round at $20m post-money) Owner 1: 500k shares (37.5%) Owner 2: 500k shares (37.5%) ...
Jeremy Wong's user avatar
2 votes
2 answers

Companies that list on an additional Stock Exchange

I am not sure if this question has been asked before. I have just started purchasing stock and have the following question: I have interest in purchasing shares of a company that has been doing very ...
Dale Stuebing's user avatar
1 vote
4 answers

Facebook buying WhatsApp for 19 Billion. How are existing shareholders affected?

A bit late in the game. But was curious on how this deal works out. Facebook bought WhatsApp for $19 billion. This involved $4 billion in cash, $12 billion in stock and $3 billion in restricted stock....
Zenil's user avatar
  • 259
1 vote
1 answer

How and when are stock shares created? Destroyed?

Apologies if this is a duplicate, but someone (quite possibly me) is confused about whether stock shares can be arbitrary manufactured at any time and in any quantity, or whether they in fact ...
keshlam's user avatar
  • 47.6k
1 vote
0 answers

Does the SEC (or any governing body) limit Rights Offerings?

Could AAPL offer all shareholders a non-transferable right to purchase two shares at a 20% discount (from today's price, exercisable for one month) for each share they own? This announcement will (...
bobuhito's user avatar
  • 502
1 vote
0 answers

What is intrinsic value of stocks with diluted voting power?

Recent technological companies went to IPO with publicly traded stocks that have 1/10th of voting power of the privately held stocks. Facebook, Google, GoPro are examples of such companies. Usually ...
Boris Suvorov's user avatar
0 votes
1 answer

Why do startups dilute their equity?

I am trying to understand why, when a startup raises funds, it dilutes its equity by issuing more shares, rather than just issuing a portion of the existing shares. For example, let's say a startup ...
John Rowlay's user avatar
0 votes
1 answer

How does a stock go from $173,000,000,000 per share to $0.11?

Investing noob here. TOPS stock (TOP Ships Inc) on the NASDAQ is currently trading at $0.11 per share but it used to be billions per share. Did they continuously raise so much capital that investors ...
MonkeyZeus's user avatar
  • 8,473
0 votes
2 answers

Diluting Shares vs Reserving Shares

I often read about a startup company diluting its shares, in order to provide additional shares for an investor during an investment round. This means that the ownership % for the co-founders is ...
Karnivaurus's user avatar
0 votes
1 answer

Trying to understand stock share dilution

Say I pay $100,000 for 10% of a new company founded by a entrepreneur, and then the entrepreneur decides to give 20% of the business to person X, for free, as they feel person X can add tremendous ...
Vivaan Daga's user avatar
0 votes
1 answer

When a public company is selling new shares at the market, will the public know it?

I have asked a question What shares are actually being sold in “ATM” format release? - From the answer, I understand that a company could be able to sell new shares to gain more money for its ...
AGamePlayer's user avatar
  • 2,527
0 votes
0 answers

How to calculate the share price after stock dilution, when the company is being taken over?

Currently, YES BANK might be taken over by SBI, and RBI has announced that SBI will get 49% equity at no less than 10 rs per share. YES BANK shares are currently trading at 16.60. There are currently ...
ssk's user avatar
  • 1
-2 votes
3 answers

Why don't companies issue more shares to create corporate empires?

Why can't companies grow ever-larger into corporate behemoths by funding a large number of acquisitions using shares? Shares are like currency that the company can mint on its own. Surely management ...
Flux's user avatar
  • 17.1k