Ann: Trading halt, page-107

Hi @Suse123, I just wanted to throw my oar in and say it's a bit more complicated than @Brentb explained.

You should think of the market cap as the total amount that the share market thinks a company is worth.

If a company is worth $100, and has 50 shares, then the market will trade those shares at $2 each (which is $100/50 shares), and if you have 5 shares, they will be worth $10.

If the company then issues and extra 100 shares to an institution for 50c each, then the company will now have 150 shares. The company will have received $50 in exchange for those 100 shares.

At the simplest level, the market will say - OK, they were work $100, then they got an extra $50, so now their market cap is $150, but they also have 150 shares on offer, so now the shares are worth $1 each (which is $150/150 shares), and so no one will buy them for $2 anymore. If you had 5 shares, they are now worth only $5. That's because you used to own 10% of the company, but now with the extra shares on issue, you only own 3% of the company - even though the company is technically worth more.

This is what is meant by dilution - your share in the company is smaller.

Some people here are arguing that it doesn't matter - by raising money the company can reach the next step in it's journey, grow it's value by more than what the simple cash is worth and everyone will benefit.

Others are saying that as shareholders, they should have been given the opportunity to provide that funding, and so keep the same percentage of the company that they had before. Existing shareholders will now get less return on their investment than they would have otherwise.

I tend to fall into the second camp.