BDPT - Interesting Read ...... When Dilution Is A Buy Signal
***If a company has a clear growth strategy and the dilution is based upon a logical motive, then far from being a sign of weakness, it can actually be a buy signal.
An Overview of Dilution
***Share dilution may happen any time a company raises additional equity capital, as newly created shares are issued to new investors. The potential upside of raising capital in this way is that the funds the company receives from selling additional shares can improve the company's profitability and growth prospects, and by extension the value of its stock.
***The important thing to remember though is that, for shareholders, this does not necessarily reduce the value of their holding. If diluting is the best, most efficient way for a company to grow at a given time, then it can increase shareholder value. A company will not issue stock for nothing in return. What it receives in return, be it the assets of another company, the knowledge and leadership of a new CEO, or just plain cash capital, adds to the value of the company. While the original shareholders ownership represents a smaller portion of the company, if the overall value of the company has risen, the value of their holding could stay the same or even rise. It all depends upon the value of the assets received for the issue.
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