Enter the existing or previous number of shares and the new number of shares into the calculator to determine the equity dilution percentage.

Equity Dilution Calculator

Equity Dilution Formula

The following formula is used to calculate the percentage ownership dilution caused by issuing new shares (i.e., the fraction of the post-issue shares that are newly issued). 

D = \frac{NS}{ES + NS} \times 100

Reference:  How to Calculate Dilution of Shares for Investors (2024)

  • Where D is the dilution percentage (percent of total shares that are newly issued)
  • ES is the number of existing shares (before issuance)
  • NS is the number of new shares issued

Equity dilution refers to changes in ownership percentage. The impact on the stock price depends on the company’s valuation and what the company receives in exchange for issuing the new shares (for example, cash in a financing round). If you assume the total company equity value stays unchanged, the implied post-issue share price is the previous share price multiplied by ES / (ES + NS).

Equity Dilution Definition

Equity dilution is the reduction in an existing shareholder’s ownership percentage that occurs when a company issues additional shares. An investor who does not buy additional shares in the new issuance typically owns a smaller fraction of the company after the issuance.

Dilution does not automatically mean the stock price will drop by the same percentage; price depends on company value, the use of proceeds, and market conditions. However, if total company value is assumed to stay the same, then the per-share value would decrease in proportion to the ownership retained.

Example Problem

How to calculate equity dilution?

First, determine the current number of shares on the market. For this example problem, the total number of existing shares is 1,000,000.

A new investor is looking to invest in the company, and the company plans to issue new stock to the investor. In this case, the new investor is set to receive 200,000 in newly issued stock.

Finally, calculate the total percentage of equity dilution.

Using the formula above:

D% = NS / (ES + NS) * 100

= 200,000 / (1,000,000 + 200,000) * 100

= 16.67% dilution

This means existing shareholders as a group would own 83.33% of the company after the issuance (they retain ES / (ES + NS) = 1,000,000 / 1,200,000 = 83.33%).

If a share was trading at $20 before the new shares were issued, then under the simplifying assumption that the total company value stays unchanged, the implied new price would be:

$20 × (1,000,000 / 1,200,000) = $16.67