In business, dilution is the process of reducing the ownership percentage of existing shareholders. This can happen when a company issues new shares, or when it grants stock options to employees. Dilution can also occur when convertible securities, such as bonds or warrants, are converted into equity. When this happens, it results in more shares outstanding and therefore each share is worth less. This can have a negative effect on shareholders, who may see their voting power reduced and their ownership stake diluted.
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