Dilution

Business / Taxes / 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 Protection

Business / Finance / Dilution Protection: Diminution in the proportion of income to which each share is entitled. MORE

Claim Dilution

Business / Finance / Claim Dilution: Certificateless municipals that can be registered on stock exchanges and are listed in newspapers. MORE

Dilutive Effect

Business / Finance / Dilutive Effect: Standard provision that changes the conversion ratio in the case of a stock dividend or extraordinary distribution to avoid dilution of a convertible bondholder's potential equity position. Adjustment MORE

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