potential dilution

Potential Dilution

The reduction in value of stock that occurs if more stock is issued. That is, if more stock is issued, there will be more stock outstanding. Among other things, this reduces the dividend per share because each diluted stock represents a smaller ownership interest in the company than it did before. Generally speaking, potential dilution applies to the situation if convertible bonds or warrants are exercised, though it may apply to a completely new issue. Many stock issues have antidilution provisions to reduce the risk incumbent to potential dilution to shareholders. See also: Diluted earnings per share.

potential dilution

The decrease in the proportional equity position of a share of stock that will occur eventually if additional authorized shares are actually issued. This term generally refers to outstanding options and convertible securities likely to be exchanged for shares of common stock at a future time.
References in periodicals archive ?
A recent study by the Investor Responsibility Research Center (see "Business Briefs," May 2001 issue) found that at S&P 500 companies, average potential dilution jumped to 13.
The IRRC reported that average potential dilution at Standard & Poor's 1500 companies reached 14.

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