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What you will learn
- Calculate an ownership stake before and after the total share count increases.
- Separate the relative decline in a stake from percentage points and price changes.
- Explain why new issues and share splits affect ownership differently.
The same personal share count in a larger total
You own 100 of the company’s 1,000 shares: 100 ÷ 1,000 × 100 = 10%. The company then issues 250 additional shares to other owners. The total becomes 1,250. You still own 100, but the stake is now 100 ÷ 1,250 × 100 = 8%. This smaller stake is what our model calls dilution.
The difference is −2 percentage points. Relative to the old stake, the decline is (8 − 10) ÷ 10 × 100 = −20%. None of your 100 shares has disappeared. The denominator has grown. State which measure you mean when describing the change.
If the table does not fit, scroll it sideways.
| Measure | Before | After |
|---|---|---|
| Your shares | 100 | 100 |
| Company’s total shares | 1,000 | 1,250 |
| Your capital stake | 10% | 8% |
New money and a new stake are two parts of the event
Suppose the model’s 250 new shares are paid for at SEK 40 each. The company then receives 250 × 40 = SEK 10,000 before any costs. The issue changes both the share count and the company’s money. Calculating your stake is not enough to value the whole event.
A relative 20% decline in the stake does not prove that your shares’ market value has also fallen 20%. Pricing requires more information about the capital, business, terms and market valuation. This task does not assign an automatic new market price after the issue.
Which count would represent ten percent afterwards?
Ten percent of 1,250 shares is 125. To hold that stake in our fixed model, you would need 25 of the 250 new shares. If those shares cost SEK 40, the payment would be SEK 1,000. The 25 belong to the already specified 250, so the total remains 1,250, not 1,275.
This checks the fraction; it is not an invitation to participate in an issue. Actual offers have particular terms and may involve different rights or allocations. Read the company’s own information for a real event. This lesson does not value subscription rights or describe such a feature in Investiq.
A split also divides up your existing shares
Compare a plain 4-for-1 split in our original company. The total of 1,000 becomes 4,000 and your 100 become 400. The stake is then 400 ÷ 4,000 = 10%. Both numerator and denominator were multiplied by the same number. The subdivision itself adds no new money to the company.
In the new issue to other owners, only the total increased in your ownership calculation. Begin by naming the company event and writing down the old and new counts. A chart or per-share price alone does not show which change occurred or what money it brought in.
Try it yourself
You own 60 of 2,000 shares in another fictional company. It issues 1,000 additional shares to other owners. Every share represents the same portion of capital. Calculate your stake before and after, and the difference in percentage points.
Show the solution and explanation
From 3% to 2%, a decline of 1 percentage point.
60 ÷ 2,000 × 100 = 3. Afterwards the total is 3,000 and 60 ÷ 3,000 × 100 = 2. The difference is 2 − 3 = −1 percentage point. Your own share count is still 60.
Check your understanding
Does a smaller stake mean your shares have disappeared?
No. In the example you retain 100 shares but the total share count grows.
Can you read the shares’ new market value directly from the decline in the stake?
No. The issue also brings in capital and has particular terms. The stake calculation alone does not determine the market price.
Practise with virtual money
Try what you just learned in a practice portfolio with virtual money. You don't deposit any real money.
How the practice portfolio worksKeep learning and practising
More lessons on this topic
Returns, inflation and company results
- Real return and inflation: calculate what your money can buy
- Fees and investment returns: account for the whole purchase and sale
- Annualized return and averages: calculate two different measures
- Deposits and investment returns: follow the money in the right order
- Revenue and profit: read a simple company result
Sources and examples
The sources support the factual explanations. Calculations and exercises were created for this lesson. Amounts and price changes are invented unless stated otherwise.
This material is educational and does not recommend securities to buy. A simulated result does not guarantee a future result.
