What is the stock dilution between partners
Why is stock dilution legal?
Here's another point of view:
Suppose you and I were 50-50 partners in a small business. Say we wanted to grow our business, but that took money. Someone (let's call them Warren) has the money we need and therefore an equal share of the business in return for the money we offer Warren.
ie all three of us now own 33% of the shares. For you and me, our share was reduced from 50% before Warren's entry to only 33%.
While this reduction in our stake may seem like bad business for us at first glance, we both agreed to deliberately not give Warren his stake out of altruism, but because it made good business sense to help us expand.
Ergo, what matters is not just your share of the cake, but also the size of the cake self! Therefore, under certain circumstances, it can make sense to dilute the stake.
Two little points:
(a) This in no way indicates that the dilution would be useful got to . Just that it sometimes Can make sense
(b) In the case of a large company, of course, they don't need yours personal Consent for the dilution. But hey, they also don't ask you when to buy a new line or start a new product.
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