I was pleasantly surprised when I received a number of very favorable comments about my recent column which discussed the basics of stock,-i.e. Although I thought that this was pretty basic stuff, I forgot that it can be confusing the first time through. Because there are often misconceptions about these terms I thought it would be useful to review them at this time.
Dilution connotes a decrease in something.
Note that a Percentage Dilution in stock ownership has no direct relationship to the value of that stock ownership position. The Board of Directors of a company is supposed to determine that the company has received fair value for the stock it issues. Dilution from an initial price is different than dilution from the current price. So, Dilution is really a matter of what perspective you take. In some cases, usually rare, the Investor means that his or her percentage ownership will always remain the same as when the initial investment was made.