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Raising Capital and other
Business Opportunities

 

Stock Option Grant

View Original Article Fri, 19 Sep 2014 18:30:00 -0700
Avino Silver & Gold Mines Ltd. wishes to announce that it has granted an aggregate of 855,000 incentive stock options under its stock option plan to its directors, officers, employees and consultants. ...

Alcoa Announces Pricing of Public Offering of Mandatory Convertible Preferred Stock

View Original Article Tue, 16 Sep 2014 18:07:00 -0700
Alcoa today announced the pricing of its public offering of 25,000,000 of its depositary shares at $50 per Depositary Share. Each Depositary Share represents a 1/10th interest in a share of Alcoa?s 5.375% Class B Mandatory Convertible Preferred Stock, Series 1, par value $1.00 per share .

Take the tortoise?s wise path to wealth: Ignore market ups and downs

View Original Article Wed, 10 Sep 2014 09:26:04 -0700
A U.S. study of 66,465 households found investors who traded the most underperformed the overall stock market by a stunning -6.5% a year

Will TPG Acquisition Breathe Life into Green Dot Share Price?

View Original Article Fri, 19 Sep 2014 07:20:02 -0700
Green Dot (GDOT) is venturing into tax refund processing services by agreeing to buy Santa Barbara Tax Products Group for about $320 million. It also cut its 2014 earnings guidance to reflect the resultant ...
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How to Calculate Stock Dilution

Stock dilution occurs when a company decides to raise capital by issuing more stock to new investors. When the "float" (the amount of shares outstanding) is increased, the investors who already own shares now have a smaller percentage of shares. Stock dilution usually occurs during a company's start-up or venture capital raising phase.

 

Here are some ways to help understand and calculate your share dilution in your private placement offering:

 

1. How does your company divide up its initial stock? When your stock-issuing company is formed, there is a certain amount of shares that belong to the company. Those shares are then divided up among the principals of the company, such as the board of directors, chief operating officer and chief financial officer. For example, a company has 2 million shares of stock when it is formed and a board member is offered 5 percent, or 100,000 shares, during the "pre-funding period."

 

2. What is the value of your company? As you get the company off the ground, there is essentially no value or assets. Therefore the value is essentially 0. This is also called net-tangible book value.

 

3. What happens when investors purchase shares in your company? They are going to offer you an amount of money for a percentage ownership in your company. Furthering the example above, say investors are willing to stake $2 million for 50 percent of the company. This immediately gives the company a value. To calculate the value, perform a simple algebra equation.

 

Investment / Percent Ownership = New Value
$2,000,000 / .50 = $4,000,000

 

In this equation 50 percent is changed to decimal form to calculate the equation. The equation essentially states if 50 percent of the company is worth $2 million, then 100 percent of the company must be worth $4 million. This is referred to as the "post-money valuation."

4. How many more shares need to be added to the float based on the post-money valuation? Because you cannot take shares away from people who already have them, you must create new shares. To calculate exactly how many shares you need to add, you need this algebra equation:

 

x / (Original Shares Issued + x) = Percent Ownership
"x" represents the number of new shares that must be added.
x / 2,000,000 + x = .50
2,000,000 / (2,000,000 + 2,000,000) = .50

 

This means the company would need to add 2 million shares to the float to meet the new ownership demand.

 

5. Calculate how the new float dilutes the shares that you currently own. Using the example above, the investor was offered 5 percent of the original float, which was 100,000 shares based on 2 million original shares. He now holds 100,000 shares out of 4 million. The equation becomes:

 

This is just a simple illustration on how share dilution effects current and new stockholders in your company.

 


 

 

 

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