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
The company has 100,000 shares and issues another 100,000 shares, so your stock is now diluted. This happens all the time when stock grants or options are issued for employees. It’s just normally on such a relatively small scale that the market doesn’t react.
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