Suppose company ABC has 100,000 shares at $10 each, and I have 10% of those shares, so own 10% of the company. I understand that a stock split would create 200,000 shares at $5 each, but the value of my holding – both in dollar value and percentage – doesn’t change.
How does stock dilution happen then, where I own a smaller percentage of the company without my selling any assets (obviously, the dollar value of my holdings would change based on the market)?
In: 5
you’re confusing up a stock split with stock offering/dilution
stock splits like you stated don’t affect your percentage of holdings and seems to be used mostly as a device to make a stock look cheaper for newer investors to buy in and also give the stock a lower price again so it may have more potential to go up in the future (no new slices of pie are added, the slices of pie just get cut smaller so more people van buy some of the pie and earnings is still shared with just fplks of 1 pie)
a dilution is when said company sells X amount of new stock to a private investor(s) or the public and increases the shares out there (another pie is added to your original pie and now you have to share earnings with the new pie folks)
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