Dilution of ownership

Reduction in the value of a company's shares following a capital increase.

When a company issues new shares or bonus shares, its capital stock increases, although the overall value of the shares remains the same. As a result, each individual share is worth less than it was prior to the new issue, and the proportion of the company owned by existing shareholders decreases. The company protects existing shareholders from the effects of dilution by granting them subscription rights, which they can use to acquire some of the newly issued shares.

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