Dilution
In the world of finance, dilution means something is being watered down, typically earnings per share.
In the world of finance, dilution means something is being watered down, typically earnings per share (see separate definition).
Warrants, share options and other convertible securities issued by a corporation have a potentially diluting effect on earnings per share because more shares are created without any boost to earnings.
Say, for example, a company has 100 shares in issue and earnings of £20. EPS is 20p. It then issues a further 100 shares to meet demand from options being exercised. Since there is no associated change in earnings, the revised EPS figure is now £20/200 or just 10p.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
-
Private school fees soar and VAT threat looms – what does it mean for you?
Rising private school fees could see more than one in five parents pull their children out of their current school. Before you remortgage, move house or look to grandparents for help, here’s what you need to know.
By Katie Williams Published
-
Best and worst UK banks for online banking revealed
When it comes to keeping your money safe, not all banks are equal. We reveal the best and worst banks for online banking when it comes to protecting your money from scams
By Oojal Dhanjal Published