Dilution

Dilution happens when a company issues new shares of stock, which spreads ownership across more shares and reduces what each existing share is worth. Think of it like slicing a pizza into more pieces—everyone gets a smaller slice. You'll hear about dilution when companies issue new stock to raise cash, pay employees with stock options, or make acquisitions. It matters because if a company dilutes heavily, your ownership percentage shrinks and earnings per share (the profit divided by total shares) can drop, even if the company's total profit stays the same. For example, if TechCorp issues twice as many shares to fund expansion, your 1% stake becomes 0.5%. Dilution isn't always bad—the money raised might fuel growth—but it's worth watching.