Dilution

Dilution happens when a company issues new shares of stock, which spreads ownership across more shares and reduces what each existing share represents. Think of it like slicing a pizza into more pieces—each slice gets smaller. You'll hear about dilution when companies do stock splits, issue employee stock options, or raise money by selling new shares. It matters because dilution can reduce your ownership percentage and earnings per share (the company's profit divided by total shares), even if the company's actual business stays the same. For example, if TechCorp issues a million new shares to fund expansion, your 1% stake might drop to 0.5% if you don't buy more shares.