Wallstarb, you are correct.
In the case we are speaking about, Ariad...
If I own 1,000,000 shares of ARIA at $2.00 and the stock has 110,000,000 shares issued and outstanding, I own just under one (1) percent of the company.
If ARIA has releases news and immediately issues 20,000,000 shares at $10, regardless of where the shares are issued (at this price: $10), ARIA now has 130,000,000 shares issued and outstanding....***and now my 1,000,000 shares (1% ownership) is **DILUTED** down to .0075% (ie., my ownership is now down to 3/4 of 1%). No way around it: my ownership in ARIA has been diluted.
I don't understand how someone cannot understand the basic principals of dilution and be invested in the market.
Dilutions suck any way you cut it (tell that to the CTIC bagholders). ARIA is a diluted mess now, too (the company issued something like 40 million shares since the Merck partnership at terrible valuations).
Dilutions to the public and private markets through PIPES are brutal.
Dilution as an investment from a large entity (ie., if Merck, in the example above, bought 20,000,000 shares at $10, would be fabulous - - because these types of investments aren't in the habit of dumping their shares----they're a buy and hold approach)----those types of dilutions are highly positive and a good sign.
All too often biotech companies participate in the former --the pump and dump, raise money on any pump. Meanwhile, the participants are generally well versed on when the deal is coming and have shorted into the deal.
