Dilution

Dilution refers to the reduction of ownership percentage in a company that occurs when new shares are issued. Imagine a pizza that represents a company; if you cut more slices and share them with others, each slice becomes smaller, meaning your share of the pizza shrinks. This can happen when a company raises funds by selling new shares, which increases the total number of shares and decreases the value of existing shares. While dilution can bring in needed capital, it can also affect the power and profit of current shareholders.