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 ?
rise to a potential dilution to net asset value per share.
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.
This prepayment precludes the potential dilution of earnings which could have resulted from exercise of the conversion feature.
Taken together, the convertible note hedge and warrant transactions reduce the potential dilution upon conversion of the notes.
The IRRC reported that average potential dilution at Standard & Poor's 1500 companies reached 14.
These transactions are intended to reduce the potential dilution to the Company's shareholders upon any future conversion of the notes.
Taken together, the convertible note hedge and warrant transactions are expected to reduce the potential dilution upon conversion of the notes.
The convertible note hedge transactions are expected to reduce the potential dilution upon conversion of the notes.
The elimination of future conversions of debt into equity reduces potential dilution of existing shareholders and represents the passing of an important milestone for the Company.
The capped call option permits the Operating Partnership to purchase Company common shares from the option counterparty at the strike price and is designed to reduce potential dilution with respect to the Company's common shares upon exchange of the notes to the extent the then market value per Company common share exceeds the strike price during the observation period relating to an exchange of notes.
This transaction also is intended to minimize the potential dilution upon future conversion of the notes.
Chattem intends to use approximately $32 million of the offering proceeds to fund a convertible note hedge transaction to be entered into with an affiliate of the placement agent for the offering, which transaction is intended to offset Chattem's exposure to potential dilution upon conversion of the Notes.

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