Dilution
The reduction in existing shareholders' ownership percentage that occurs when a company issues new shares, such as during a funding round, stock option exercise, or convertible note conversion. While dilution reduces the proportional ownership of current shareholders, it ideally increases the overall value of the company through the capital raised. Board members must carefully evaluate dilution when approving new equity issuances to balance growth needs with shareholder protection.
Related Terms
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Short for 'capitalization table,' a detailed spreadsheet or document that records the equity ownership structure of a co...
A contractual right granted to an employee, director, or advisor to purchase a specified number of company shares at a p...
A class of equity ownership that carries preferential rights over common stock, typically including liquidation preferen...
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