D

Glossary · PSX term

Dilution.

Dilution is the drop in each existing share's ownership when a company issues new shares.

Definition

When new shares are created through a right issue, conversion, or fresh offering, existing holders own a smaller slice of the company unless they buy more. Earnings per share can also fall as profit is spread over more shares.

Worked example

If a company doubles its share count in a right issue and you do not subscribe, your ownership percentage roughly halves.

Related on PSX Clarity

Secondary offering

Earnings per share

Shares outstanding

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Deliverable futures

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Dividend discount model

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Discounted cash flow (DCF)

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The discount rate converts future cash into today's value, reflecting time and risk.