Re: [Czechlist] TERM: diluted shares
- In a message dated 4/30/03 9:01:28 AM, mjanda@... writes:
> Yes, Jamie, that's what I understand. Diluted s.= all shares issued. But areThere's a great dictionary online that I've just found:
> basic shares the same as common shares ???
> Probably they are not, as google returns multiple hits of "Basic common
I think you can find something out from their definition of diluted earnings:
A situation whereby additional shares of stock were sold to other investors
causing the earnings to be spread over a broader base. Thus fewer earnings
are available for each share unless earnings grow proportionately more than
the number of new shares issued."
And here is something from the Oxford Dictionary of Finance:
"DILUTION OF EQUITY
An increase in the number of ordinary shares in a company without a
corresponding increase in its assets or profitability. The result is a fall
in the value of the shares as a result of this dilution."
My understanding is that "diluted shares" are what you've got when a company
has issued additional shares without, as the dictionary says, increasing its
assets or profitability. Let's say a company had a million shares
outstanding, and you owned 100, on which you got a dividend of 0.06. Then
the company issues another million shares, and they spread the dividend over
the new total of 2 million shares. Your shares have been diluted (remember
that diluted literally means "watered down"), and now you're only getting a
dividend of 0.03. This decrease in dividend yield will wind up lowering the
value of your shares.
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