New Shares: What Happens to Your Slice?
Opening question: you own 10,000 of 100,000 shares. The company issues 25,000 more. What happens to your 10%?
Why this matters for beginners
Issuing shares (dilution) is common. Whether it hurts depends on price and use of the money. This is general education, not personal advice.
Main explanation
Fictional River Energy has 100,000 shares. You own 10,000, which is 10%.
It issues 25,000 new shares. Total becomes 125,000. If you don't buy any, you own 10,000 ÷ 125,000 = 8%.
The company receives cash for the new shares. That capital belongs to the business, and indirectly to all shareholders.
Whether value per share falls depends on the issue price and on how well the money is used. Issuing at a fair price and investing it well can leave value per share unchanged or higher.
Dilution of your percentage does not automatically mean an equal drop in the share price.
Example using a real company
River Energy (fictional) is worth €1,000,000 (€10 per share). It issues 25,000 shares at €10, raising €250,000. Value becomes €1,250,000 over 125,000 shares: still €10 per share.
- →Issue at €10: €1,250,000 ÷ 125,000 = €10 per share.
- →Issue at €6: €1,150,000 ÷ 125,000 = €9.20 per share, before any return on the cash.
Common beginner mistakes
- ✕Assuming dilution always cuts the share price by the same percentage.
- ✕Ignoring what the company does with the new money.
Key terms
- Dilution
- A fall in each existing holder's ownership percentage when new shares are issued.
- Issue price
- The price at which a company sells new shares.
Key takeaways
- 01Not participating shrinks your percentage.
- 02The effect on value per share depends on issue price and use of capital.
Check yourself
- 01You own 10,000 of 100,000 shares. 25,000 new shares are issued and you buy none. What is your stake?
- 02Who receives the money from newly issued shares?
- 03Does dilution automatically cause an equal price drop?
Try the concept on a real company
In the Analyzer, check whether a company's share count has grown over time and what it did with the money.
Educational examples only. Not buy or sell recommendations.