Dilution is a term used to describe the value of a company share after a new investor enters the scene. This happens when more shares of the company stock are issued, and once purchased all the previous shareholders own a smaller percentage of the company. Estimating or determining the dilution is made simpler with the free dilution calculator.
Why You Need the Dilution Calculator
If you own shares in a company, then you should be interested in how a new investor will affect their value. Once more shares in the company are made available and purchased by one or more investors, the original owners of the stock are affected to some extent. In some cases the value is decreased considerably, whereas in other cases the value is only slightly lowered. In addition to negatively affecting the value and return on an investment, stock dilution also decreases the percentage of ownership a shareholder has.
Using the Dilution Calculator to Determine Value
The Excel template can be downloaded and opened on a computer with the program. Once the template is open, the values for different scenarios can be entered into the corresponding fields. These values can be hypothetical to see what could happen if a certain amount of shares are added to the existing number and how the diluted percentage of ownership will lower the value of the investment.
The upper fields show the ownership percentage and estimated value, as well as what the resulting numbers would be for a specific post. The middle field is an estimated value of the IPO and next to it the return. Finally, on the bottom you are able to see the value for each share for a specific amount. Since the template is formatted so that the dilution calculator will do the math according to the entered values, there is not a lot of research or formula entering required.