How does a company start with say 100 shares and value gets “crammed” down with more investment? If one party has five of those shares, won’t they always have the five shares and new investors get shares from some of the other 95? Are there shares that cannot get diluted? Golden shares or?
In: Economics
Dilution happens when new shares are issued. For example, say there’s an IPO of 100 shares, but then later on the company decides to give employees stock options as a benefit and 5 employees get 10 shares each. The company could choose to create new stock to give to their employees, increasing the total number of shares to 150 and diluting them.
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