Stock dilution | Stocks and bonds | Finance & Capital Markets | Khan Academy



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Why the value per share does not really get diluted when more shares are issued in a secondary offering. Created by Sal Khan.

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Finance and capital markets on Khan Academy: When companies issue new shares, many people consider this a share “dilution”–implying that the value of each share has been “watered down” a bit. This tutorial walks through the mechanics and why–assuming management isn’t doing something stupid–the shares might not be diluted at all.

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31 thoughts on “Stock dilution | Stocks and bonds | Finance & Capital Markets | Khan Academy”

  1. Fantastic. Exactly what I wanted to know and in a short video. I wasn't thinking about the money being given to the company in exchange for the new shares and how it raises the company's value.

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  4. So in other words you buy shares to get ownership of the company, unless the board decides they want to issue more shares so that you own less… despite you having paid money for that ownership. Okay then, you keep your useless shares and I'll keep my money.

  5. How does a corporation know the limit of the number of shares that is demanded by the market? If it issues too many shares then won't it hurt its own stock price or even turn into a South Sea Bubble or a Mississippi Scheme?

  6. If i wanted to kick out a shareholder in my company who is refusing to leave, and i am the majority share holder in that company (UK company), can i dilute the shares to a point where it becomes worthless ? (ie creating more shares without bringing in an investment)

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