dilution


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Related to dilution: Dilution Factor, serial dilution

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 ?
Dilution indicates that a shareholder's proportional claim on the firm has declined owing to shares given to outside shareholders.
The topic of testing core sand dilution and other additives (including new sand) would not be complete without evaluating the emission characteristics of green sand.
As the 17% ISO dilution showed similar effects, however, we cannot exclude that these effects are due to simple dilution.
The goal of this communication is to analyze the antiviral potential of various dilutions of alcoholic extract of the N.
The location of the EGR valve far upstream of the engine does not provide quick actuation for cylinder dilution control due to the significant transport delays.
AMC used benchmarking and case studies to identify dilution experienced at different narrow-vein mines, guide equipment selection, drill-and-blast designs, and technical services procedures and recommendations.
The high dilution preparations were applied daily with a manual sprayer, Brudden[R], which had a 500 mL capacity, on the ants moving on the tracks at a predetermined point 50 cm from the entry point of the tracks on the respective pre-selected anthills.
AEDA revealed that there were 28 odor-active compounds in the flavor dilution factor range of 3 to 19,683.
One of the pathways for increased spark-ignition engine efficiency is through charge dilution, either with exhaust gas recirculation (EGR) or by a leaner air-fuel mixture [3].
Global water, energy and maintenance solutions provider, NCH Europe, has launched a new range of dilution, dosing and spraying equipment.