Shareholders' Agreements · glossary

Dilution

An owner's share of the company shrinking because new shares are issued and it buys none. It keeps every share it had, but each is a smaller part of the company. Dilution is the cost of declining an emergency issue of shares. Clause 7.5 · Chapter 6

Explained in Chapter 6, Money, of Shareholders' Agreements.

The main page for this term is Dilution, in Venture Deals.

How it comes up, in Chapter 6
The emergency clause ends with the cost of saying no: an owner that does not buy is diluted. Dilution means an owner's slice shrinks because the register grows and its holding does not. The owner keeps every share it had, but each one is a smaller part of the company. No emergency round was ever called here, but the example shows what one would have cost.
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