What Is Dilution?
Dilution is the reduction in a shareholder’s percentage ownership when a company issues new shares or converts existing instruments into equity.
Dilution Meaning
The dilution meaning centres on how ownership changes as a company raises new capital. To define dilution in practice, it occurs when additional shares are created during funding rounds, option exercises, or the conversion of ASAs and CLNs. While dilution reduces percentage ownership, it does not always reduce value; if the company grows, a smaller stake can still be worth more. A clear dilution definition helps founders and investors understand the long-term impact on control, returns and fully diluted ownership.
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