I don’t quite understand your reasoning that Linda is diluting the stock for her own benefit. If she were to receive 100 shares with less dilution instead of 400, she would probably expect the stock price to rise to $40, not $10.
No, that’s not how the math works at all.
If she owned 100% of the company that would be the case, but she doesn’t. Because she owns only a fraction, and the dilution gets distributed across the entire investor base, each share she gets is easily a net positive even with dilution.
To illustrate how this works. Let’s say Linda owns 100 million shares and let’s say that is 10% of the company. If Linda pays herself another 100 million shares, she now owns twice as much. 200 million. However, the company value has only been diluted 10%.
So in this scenario, let’s say the company was worth $1B before Linda paid herself. Stock price was $1. Linda had $100M. After she paid herself, the company valuation stayed the same so the stock price dropped to $.91. But now Linda has 200M shares, so she has $182 million.
So even with the dilution, it’s worth way more to her to get more shares. Unfortunately retail investors aren’t trued up like this, so our value just goes down. We have to eat the loss, not her.
Market Data 
Markets 
AI
