Dilution
Short definition
Dilution is a new share or convertible shrinking existing holders’ claim on profit, cash and control. EPS dilution is not the same as economic-value dilution.
Detailed explanation
If the issue price sits below intrinsic value, economic dilution exists. EPS can be masked with accruals and debt.
Minority and preferred stock split control dilution from earnings dilution. Securities-law sale rules separately discipline who is diluted by whom.
Why it matters for the CFO
Paying an acquisition in shares conserves cash and dilutes current holders. A cash bid creates leverage dilution instead.
How to read it
An x% dilution may not be an x% loss of control and cash rights; preferences and votes split.
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What to learn next
Definitions are educational. They are not investment, credit or tax advice.