Dilution

Dilution occurs when a company issues additional shares of stock, thereby reducing the ownership percentage of existing shareholders. While dilution doesn't necessarily decrease the absolute value of a shareholder’s investment, it does reduce their proportional stake in the company and potential voting power.

Dilution typically happens during:

• New funding rounds (e.g., Series A, B, C)

• Employee stock option exercises

• Issuance of convertible securities

• Mergers and acquisitions involving stock issuance

It is a critical consideration for investors and founders, as excessive dilution can undermine ownership value and control over the business.