What is Dilution of Ownership?
A dilution of ownership is a process that involves the decrease of the fractional ownership that is enjoyed by shareholders of a given company. This reduction in the value of each individual share takes place when the company chooses to issue additional shares for purchase. A dilution of ownership can also take place due to the conversion of one security into another form, such as the conversion of preferred stock to common stock. The decision to initiate a dilution of ownership is not something that a company does without careful consideration. Usually, the investigation into the possibility of issuing additional shares begins well before any action is taken. If the idea is determined to be in the best interests of the future operations of the company, an escalation process is normally implemented. The structure of the implementation must be in compliance with the bylaws and other founding documents of the company. This means that if any amendments must be made to those documents, the
