Basic Equity Dilution Calculator
This tool calculates your new ownership percentage in a company after new shares are issued, based on your current shares and the total shares outstanding.
Enter Share Details
Understanding Equity Dilution
What is Equity Dilution?
Equity dilution happens when a company issues new shares of stock. This increases the total number of shares outstanding. If you already own shares, your percentage of ownership decreases because your number of shares now represents a smaller piece of a larger pie (the total shares). Dilution doesn't necessarily mean your shares are worth less individually, but it does mean you own a smaller *proportion* of the company.
How is Dilution Calculated?
The basic calculation involves comparing your number of shares to the total number of shares outstanding, both before and after the new shares are issued.
- Original Ownership Percentage: (Your Shares Before / Total Shares Before) * 100
- Total Shares After: Total Shares Before + New Shares Issued
- New Ownership Percentage: (Your Shares Before / Total Shares After) * 100
The difference between your original percentage and your new percentage represents the extent of the dilution.
Equity Dilution Examples
See how issuing new shares affects a shareholder's percentage:
Example 1: Simple Dilution
Scenario: A company with 1,000 shares issues 500 new shares. You own 100 shares.
1. Known Values: Total Shares Before = 1,000, New Shares Issued = 500, My Shares Before = 100.
2. Original Ownership: (100 / 1000) * 100 = 10%.
3. Total Shares After: 1000 + 500 = 1,500.
4. New Ownership: (100 / 1500) * 100 = 6.67%.
Conclusion: Your ownership is diluted from 10% to 6.67%.
Example 2: Moderate Dilution
Scenario: Company has 10,000 shares, issues 2,000 new shares. You own 500 shares.
1. Known Values: Total Shares Before = 10,000, New Shares Issued = 2,000, My Shares Before = 500.
2. Original Ownership: (500 / 10000) * 100 = 5%.
3. Total Shares After: 10000 + 2000 = 12,000.
4. New Ownership: (500 / 12000) * 100 = 4.17%.
Conclusion: Your ownership is diluted from 5% to 4.17%.
Example 3: Significant Dilution
Scenario: Company has 100 shares, issues 100 new shares. You own 10 shares.
1. Known Values: Total Shares Before = 100, New Shares Issued = 100, My Shares Before = 10.
2. Original Ownership: (10 / 100) * 100 = 10%.
3. Total Shares After: 100 + 100 = 200.
4. New Ownership: (10 / 200) * 100 = 5%.
Conclusion: Your ownership is diluted from 10% to 5%.
Example 4: Large Company, Small Dilution
Scenario: Company has 5,000,000 shares, issues 1,000,000 new shares. You own 250,000 shares.
1. Known Values: Total Shares Before = 5,000,000, New Shares Issued = 1,000,000, My Shares Before = 250,000.
2. Original Ownership: (250000 / 5000000) * 100 = 5%.
3. Total Shares After: 5000000 + 1000000 = 6,000,000.
4. New Ownership: (250000 / 6000000) * 100 = 4.17%.
Conclusion: Your ownership is diluted from 5% to 4.17%.
Example 5: No Dilution (No New Shares)
Scenario: Company has 1,000 shares, issues 0 new shares. You own 100 shares.
1. Known Values: Total Shares Before = 1,000, New Shares Issued = 0, My Shares Before = 100.
2. Original Ownership: (100 / 1000) * 100 = 10%.
3. Total Shares After: 1000 + 0 = 1,000.
4. New Ownership: (100 / 1000) * 100 = 10%.
Conclusion: Your ownership remains 10%. No dilution occurred.
Example 6: Starting with Zero Shares
Scenario: Company has 1,000 shares, issues 500 new shares. You own 0 shares.
1. Known Values: Total Shares Before = 1,000, New Shares Issued = 500, My Shares Before = 0.
2. Original Ownership: (0 / 1000) * 100 = 0%.
3. Total Shares After: 1000 + 500 = 1,500.
4. New Ownership: (0 / 1500) * 100 = 0%.
Conclusion: Your ownership remains 0%. You were not diluted, as you had no equity to dilute.
Example 7: High Original Ownership
Scenario: Company has 1,000 shares, issues 200 new shares. You own 500 shares.
1. Known Values: Total Shares Before = 1,000, New Shares Issued = 200, My Shares Before = 500.
2. Original Ownership: (500 / 1000) * 100 = 50%.
3. Total Shares After: 1000 + 200 = 1,200.
4. New Ownership: (500 / 1200) * 100 = 41.67%.
Conclusion: Your 50% ownership is diluted to 41.67%.
Example 8: Tiny Original Ownership
Scenario: Company has 10,000,000 shares, issues 1,000,000 new shares. You own 1,000 shares.
1. Known Values: Total Shares Before = 10,000,000, New Shares Issued = 1,000,000, My Shares Before = 1,000.
2. Original Ownership: (1000 / 10000000) * 100 = 0.01%.
3. Total Shares After: 10000000 + 1000000 = 11,000,000.
4. New Ownership: (1000 / 11000000) * 100 = 0.0091% (approx).
Conclusion: Your ownership is diluted from 0.01% to about 0.0091%.
Example 9: Doubling Shares Outstanding
Scenario: Company has 500,000 shares, issues 500,000 new shares. You own 50,000 shares.
1. Known Values: Total Shares Before = 500,000, New Shares Issued = 500,000, My Shares Before = 50,000.
2. Original Ownership: (50000 / 500000) * 100 = 10%.
3. Total Shares After: 500000 + 500000 = 1,000,000.
4. New Ownership: (50000 / 1000000) * 100 = 5%.
Conclusion: Your ownership is halved from 10% to 5%.
Example 10: Initial Public Offering (IPO) Scenario (Simplified)
Scenario: Before IPO, company has 10,000,000 shares. They issue 2,500,000 new shares in the IPO. You owned 1,000,000 shares before.
1. Known Values: Total Shares Before = 10,000,000, New Shares Issued = 2,500,000, My Shares Before = 1,000,000.
2. Original Ownership: (1000000 / 10000000) * 100 = 10%.
3. Total Shares After: 10000000 + 2500000 = 12,500,000.
4. New Ownership: (1000000 / 12500000) * 100 = 8%.
Conclusion: Your ownership is diluted from 10% to 8% post-IPO.
Frequently Asked Questions about Equity Dilution
1. What does this calculator tell me?
It shows you what percentage of the company you will own after a new issuance of shares, assuming your own share count remains the same.
2. Is dilution always bad?
Not necessarily. While it reduces your ownership percentage, the new shares are often issued to raise capital for company growth, which could increase the total value of the company (and your shares) in the long run. However, it's important to understand the *degree* of dilution.
3. What are common reasons a company issues new shares?
Companies issue new shares for various reasons, including raising funds for expansion (like in funding rounds or IPOs), making acquisitions, paying employees/executives (stock options, grants), or converting convertible debt/notes into equity.
4. Does this calculator consider the share price?
No, this basic calculator focuses purely on the *percentage* of ownership based on the number of shares. It does not calculate the monetary value of your shares or the impact of the new issuance on the share price.
5. What is the difference between authorized shares and outstanding shares?
Authorized shares are the maximum number of shares a company is legally allowed to issue. Outstanding shares are the number of shares that have actually been issued and are currently held by shareholders (including the public and insiders).
6. What if I own a different class of shares (like preferred stock)?
This calculator assumes a single class of shares (like common stock) for simplicity. Preferred stock often has different rights and might have anti-dilution protections, which this basic calculator does not account for.
7. What are 'anti-dilution provisions'?
These are contractual clauses (often in preferred stock agreements or convertible notes) designed to protect investors from dilution by adjusting the conversion price of their securities or granting them additional shares if the company issues new shares at a lower price (a "down round"). This calculator does NOT account for these complex provisions.
8. Can dilution affect voting rights?
Yes, if your ownership percentage decreases and shares come with voting rights, your proportion of the total voting power may also decrease.
9. What happens if 'Total Shares Outstanding Before' is zero?
If the company had zero shares outstanding before, you couldn't own shares (unless you were the *first* shares ever issued). The calculator requires a positive number for 'Total Shares Outstanding Before' to make a meaningful calculation of your original and new percentage.
10. Why might the calculator show an error?
Errors occur if you don't enter valid, non-negative numbers, or if you enter zero for "Total Shares Outstanding (Before New Shares)". It also requires "Total Shares Before + New Shares Issued" to be greater than zero to avoid division by zero when calculating the new percentage.
