Investing term

What is Dilution?

Your ownership percentage shrinks because the company issued more shares.

Dilution is the shrinking of your ownership percentage when a company issues new shares. The pie gets cut into more slices, so each existing slice is smaller — and your claim on future earnings drops unless the new cash creates enough value to make up for it. Heavy, repeated dilution is a quiet way shareholders get poorer even when a company looks like it's growing.

For example

You own 1% of a company; it issues 20% more shares to raise cash, and your stake silently falls to about 0.83% — same shares, smaller ownership.

Dilution is taught hands-on in Stage 8 — Corporate Actions: What Lands in Your Account.

See the lesson →

Related terms

AcquisitionOne company buys another. The bought company's shares are converted to cash, acquirer stock, or a mix at the closing price.Carve-outA parent company sells part of a subsidiary in an IPO, keeping a stake.Corporate actionAny event initiated by a company that changes its securities or distributes value to holders.Cost basisWhat you originally paid for a holding, used to calculate gains and losses when you eventually sell.
← Back to the full glossary