A company may issue new shares in order to raise cash to fund expansion. Raising additional cash allows the business to grow and create more value for existing stockholders through dividends and share price appreciation. Companies that seek external funding use incorporation as the launching point for raising cash; this involves creating new shares for sale to outside investors. The shares usually carry less value than those owned by the stakeholders who initially created the business. This process is called share Dilution because each stockholder’s proportional ownership of the company decreases once new shares are issued. Share dilution can make existing stockholders feel less secure about their investment as it makes them seem less valuable overall. However, if this process leads to greater long-term success for all concerned parties, it can be beneficial for all stakeholders— even if they do not agree with this concept— to achieve greater wealth through this method.New shares dilute existing stockholders’ proportional ownership in the company. Each time a new share is issued, an investor loses control over a greater percentage of his stake in the business due to decreased ownership percentages on his original shares.If multiple investors hold smaller stakes in a company, this results in decreased control across the board for that business’s stakeholders due to new share issues multiplied by their own reduced ownership percentages on previous issues of stock. The perceived value of a stake will decrease when an investor sees his proportional ownership decreasing as a result of new share issuances multiplied by his reduced control over that stake.Diluting existing stockholders via new share issuances may seem like an unfair way for companies to manage shareholders’ stakes; however, this rarely has much impact on actual business success since most companies are able to raise additional funds at favorable times without much drama anyway.Rather than focusing on strategies that reduce overall value instead of building value per preferred means — i.e., internally — businesses should strive instead toward achieving strong performance within their means so as not only increase owners' net worth but also enhance employee satisfaction and create stability within local economies and communities where they operate via creating local employment opportunities for residents who would otherwise need additional income support from elsewhere if they did not have access locally either directly or via commuting elsewhere for employment elsewhere .
