RI Dilution occurs when shareholders skip buying new shares, reducing their ownership percentage, voting power, and earnings per share in the company.
Rights Issue Dilution refers to the reduction in the ownership percentage of existing shareholders when a company issues new shares through a rights issue. Since new shares are offered to existing shareholders in proportion to their current holdings, shareholders who do not exercise their rights and buy the additional shares will experience a decrease in their stake in the company.
For example, if a company offers one new share for every five shares held, shareholders who do not participate will have their percentage ownership diluted. This dilution typically affects voting rights and earnings per share (EPS).
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