Equity dilution occurs when a company issues new shares, thereby decreasing the ownership percentage of existing shareholders. This process typically happens during capital raises, where new investors acquire shares in exchange for funding. While necessary for growth, dilution can lessen the value of each existing share and reduce the voting power of current owners. It is a frequent consequence of financing business expansion.
Context
For digital asset companies, equity dilution is a primary consideration during funding rounds, especially when traditional equity structures are involved. Project teams must balance the requirement for capital with preserving the value and influence of early supporters. Understanding its impact is crucial for investors assessing the long-term value and governance implications of their holdings.
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