alt Hacker NewsIt’s literally dilutive. Current shareholders now only own 97.5% of the equity instead of the 100% they owned previously.
Replies
loeg • yesterday at 10:29 PM
They own a smaller portion of outstanding shares, but the shares they own are worth more. Their value doesn't decrease.
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nextaccountic • yesterday at 10:19 PM
Wait, how is this legal? How are current shareholders made whole?
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Yes, even if the company raises $10b, the ownership stake and voting power of a share is reduced by 2.5%.
And if that $10b figure is a fixed target, then if the share price continues to fall, the more shares they will need to issue, resulting in even more dilution.