dilution

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Related to diluted: Diluted Earnings Per Share

Dilution

Diminution in the proportion of income to which each share is entitled. Issing new shares often causes dillution.

dilution

A decrease in the equity position of a share of stock because of the issuance of additional shares. Dilution is usually detrimental to the position of existing shareholders because it weakens their proportional claim on earnings and assets. See also potential dilution.

Dilution.

Dilution occurs when a company issues additional shares of stock, and as a result the earnings per share and the book value per share decline.

This happens because earnings per share and book value per share are calculated by dividing the total earnings or book value by the number of existing shares.

The larger the number of shares, the lower the value of each share. Lower earnings per share may trigger a selloff in the stock, lowering its price. That's one reason a company may choose to issue bonds rather than new stock to raise additional capital.

Similarly, if companies merge or one buys another, earnings may be diluted if they don't increase proportionately with the combined number of shares in the newly created company.

Dilution can also occur if warrants and stock options on a stock are exercised, and if convertible bonds and preferred stock the company issued are converted to common stock.

Companies must report the worst-case potential for such dilution, or loss of value, to their shareholders as diluted earnings per share.

dilution

  1. the decrease in control and EARNINGS PER SHARE experienced by existing shareholders in a JOINT-STOCK COMPANY when SHARE ISSUES are made which attract new shareholders. Dilution is a particular problem in fast-growing, family-controlled companies where the need to raise new capital may dilute the founding family's shareholdings to below 50%, causing them to lose potential control of the company.

    In the past, companies have sought to avoid dilution whilst continuing to raise capital by issuing NON-VOTING SHARES; but these are nowadays disapproved of by most STOCK MARKETS.

  2. the weakening of the monopoly of skills of a particular occupational group by the recruitment of less-skilled workers to perform the same work. See SKILL.
References in periodicals archive ?
Income or loss from continuing operations is the number used to determine whether diluted EPS is decreased relative to basic EPS by the possible effect of potential common shares.
metropolitan area supermarkets revealed that diluted juices are often priced as high as--or higher than--their pure juice counterparts.
Enterprises presenting both basic and diluted EPS would be required under the tentative conclusions to disclose
As previously announced, Mobile Mini expects 2006 pro forma EBITDA of between $118 million and $119 million and pro forma diluted earnings per share in the $1.
09 per diluted share, as compared to full year 2016 net income of $171 million, or $2.
11 per diluted share) to true up its estimate of collection rates and $10 million (negative impact of $0.
Adjusted operating income or loss, adjusted earnings and net loss and adjusted earnings and net loss per basic and diluted share referred to in this press release are non-GAAP measures and exclude the following items: amortization of intangibles and acquired technology, charges and benefits from exit and disposal activities, asset impairment charge, benefit from tax refund and adjustments and non-cash stock option compensation charges.
Fiscal 2006 diluted earnings per share are currently estimated in the range of $0.
Therefore, the Company's revised guidance for 2006 calls for total revenues of $221 million to $225 million, representing an increase of approximately 21% over forecasted 2005 total revenues using the midpoint of the Company's guidance for each period; operating expenses including depreciation of $146 million to $148 million; and earnings per share on a diluted "If Converted" basis of $0.
For the fourth quarter of 2005, the Company expects to report diluted EPS from continuing operations of approximately $0.
74 per diluted share, in the fourth quarter ending December 31, 2005.