Your ownership before
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Calculator · Stock Trading
Share dilution calculator
Enter the share count, the new shares (or the dollars raised and the offering price), your own holding and net income. The share dilution calculator returns your stake before and after the issue and what the larger count does to earnings per share.
Your ownership after
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Change in your stake
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EPS before
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EPS after
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The working
What the dilution figures measure
Your ownership is your shares divided by every share outstanding. A new issue grows the bottom of that fraction and leaves the top alone, so your stake shrinks in the ratio of the old count to the new one. Earnings per share does the same thing while net income holds still, because it is net income over the same bigger count. Written out, your stake after is your shares over (old shares plus new shares), and the dilution is the new shares over that combined total. If the offering is announced as a dollar amount, divide the dollars raised by the offering price to get the share count. A follow-on offering is the usual way this happens for a company that is already listed.
A worked example on the defaults
A hypothetical company has 50,000,000 shares outstanding and earned $25,000,000 over the past year. That is $0.50 a share. You hold 500,000 shares, which is 1.000% of the company. It then sells 10,000,000 new shares, taking the count to 60,000,000. Your 500,000 shares now come to 0.833%. Your stake has shrunk by 16.67%, and with earnings unchanged EPS falls by the same 16.67%, to $0.4167. No money left your account. You own a smaller slice of a pool that now holds the cash from the sale, and whether each slice is worth more or less depends on what that cash earns once it is put to work, which is why stocks often drop when a company sells more shares before anyone knows the answer.
What to check in the filing
The share count on a quote page can lag by a quarter or more. The cover page of the latest 10-Q or 10-K gives the count on a recent date, and the offering prospectus gives the number of shares being sold, including any extra the underwriters can buy. Options, warrants and convertible notes sit outside the basic count, so the dilution that matters over a few years is measured against fully diluted shares, and warrants in particular are dilution on a delay. Check too whether the company has a shelf registration on file, which lets it sell more stock at short notice. Flat net income is an assumption. Interest saved by repaying debt, or profit from a new plant, changes the EPS after the issue, and the optional field lets you put in your own estimate.
Questions about this calculator
How do you calculate the dilution percentage of a share offering?
Divide the new shares by the share count after the issue. A company with 50,000,000 shares that sells 10,000,000 more has 60,000,000, and 10,000,000 / 60,000,000 is 16.67%. Every existing holder's stake shrinks by that proportion, whatever its size. Headlines sometimes quote new shares over the old count instead, 20% here, so check which base a figure uses.
Does a stock always fall when the company issues new shares?
No. The price also reflects what the company does with the money. Cash that pays off expensive debt or funds a project with a decent return can leave each share worth as much as before, or more. Cash raised to cover operating losses buys time, and holders end up with a smaller slice of a business that is still losing money.
Why does EPS fall by the same percentage as my stake?
Both figures divide by the share count. If net income stays put, EPS moves by the ratio of old shares to new shares, exactly as your ownership does. The two part ways once the new money starts earning, or earnings change for other reasons. Enter a net income after the issue to see that case.
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