Calculate equity dilution and implied new share price from existing shares, new shares, and previous share price, assuming company value stays unchanged.
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Equity Dilution Formula
The calculator uses the number of existing shares, the number of new shares issued, and the previous share price to estimate ownership dilution and the implied share price after dilution.
- Existing Shares: The number of shares outstanding before the new shares are issued.
- New Shares: The number of additional shares being issued.
- Total Shares: Existing shares plus new shares.
- Equity Dilution (%): The percentage of the post-issuance company represented by the new shares.
- Previous Share Price: The share price before the new shares are issued.
- Implied New Share Price: The estimated share price if the total company value stays unchanged after the new shares are issued.
The equity dilution result shows how much of the company the newly issued shares represent after the issuance. The implied new share price function assumes the company’s total value does not change, so the same value is spread across more shares.
Common Dilution Levels
The table below shows how dilution changes as new shares increase relative to the existing share count.
| Existing Shares | New Shares Issued | Total Shares | Dilution |
|---|---|---|---|
| 1,000,000 | 50,000 | 1,050,000 | 4.76% |
| 1,000,000 | 100,000 | 1,100,000 | 9.09% |
| 1,000,000 | 250,000 | 1,250,000 | 20.00% |
| 1,000,000 | 500,000 | 1,500,000 | 33.33% |
Implied Share Price After Dilution
This table shows the effect on price when the previous share price is $10.00 and total company value is assumed to stay the same.
| Existing Shares | New Shares | Previous Share Price | Implied New Share Price |
|---|---|---|---|
| 1,000,000 | 50,000 | $10.00 | $9.52 |
| 1,000,000 | 100,000 | $10.00 | $9.09 |
| 1,000,000 | 250,000 | $10.00 | $8.00 |
| 1,000,000 | 500,000 | $10.00 | $6.67 |
Example
Example 1: Basic equity dilution
You have 1,000,000 existing shares and issue 250,000 new shares. The previous share price is $12.00.
The equity dilution is 20.00%, and the implied new share price is $9.60.
Example 2: Smaller share issuance
You have 2,000,000 existing shares and issue 100,000 new shares. The previous share price is $5.00.
The equity dilution is 4.76%, and the implied new share price is $4.76.
FAQ
What does equity dilution mean?
Equity dilution means existing ownership is spread across a larger number of shares. If new shares are issued, each existing share represents a smaller percentage of the company than it did before, unless the shareholder also receives or buys enough new shares to maintain the same percentage ownership.
Is dilution always bad?
Dilution is not always bad. If the company issues shares to raise money and uses that money well, the company’s total value may increase enough to offset the dilution. The calculator’s implied share price assumes total company value stays unchanged, so it shows the mechanical dilution effect only.
Why does the calculator use new shares divided by total shares?
After the share issuance, the new shares are part of the total share count. Dividing new shares by total shares shows what percentage of the post-issuance company is represented by the new shares. This is why the denominator is existing shares plus new shares, not just existing shares.
