Financial Statements
Share Dilution
A reduction in each existing shareholder’s ownership percentage because more shares are issued.
Also called: dilution
What it means
Share dilution happens when a company issues additional shares, which can reduce the ownership percentage and sometimes the earnings per share attributable to existing shareholders. New shares may be issued for compensation, acquisitions, fundraising, or convertible securities.
Why it matters
A business can grow overall while still leaving existing shareholders with a smaller slice of the company.