Management Glossary

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dilution

The issuing of more shares from a company's treasury so that the the ownership of the company is spread across a higher number of shares, i.e., it is diluted, and the fraction of the corporation that each existing shareholder owns is, consequently, reduced unless he or she buys a percentage of the new shares equal to the percentage of the company they owned prior to the dilution. Dilution may be used to bring more funds into the company (i.e., by selling more shares) or to acquire another company by paying for it partially or wholly with shares of the acquiring company.

Contributed by: Managerwise Staff

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