October 18th Bitbunny Quiz Answer is 'Equity Dilution'! ✨ <ㅈㅂㅎㅅ> Question Fully Explained & Everything Investors Need to Know About 'Equity Dilution'! (Up to 100 Coins)
"Accumulate knowledge and earn coins daily!" Smart AppTech 'Bitbunny' has released a new quiz on October 18th (Friday). Today's question was about 'equity dilution,' a topic of investment common sense. The Bitbunny quiz offers up to 100 coins for correct answers. Let's now fully break down the question and answer, as well as the important investment concept of 'equity dilution'!
1. October 18th Bitbunny Quiz Question & Answer!
Bitbunny's 'Today's Quiz' opens anew every midnight! Let's check the October 18th question and answer.
Question: "When a company issues new shares to raise capital or issues securities such as convertible bonds (CBs) or bonds with warrants (BWs), the phenomenon where the equity ratio of existing shareholders decreases is called OOOO!!"
Hint: ㅈㅂㅎㅅ (Jibunheesuk - Korean for equity dilution)
Answer: Equity Dilution
2. A Must-Know for Investors! Complete Explanation of 'Equity Dilution'!
Today's Bitbunny quiz answer, 'equity dilution,' is a core concept that stock investors must understand.
🔹 What is Equity Dilution?
This is a phenomenon that occurs when a company issues new shares to raise capital, or issues securities convertible into shares (such as convertible bonds, bonds with warrants). It means that **while existing shareholders' number of shares held remains the same, the total number of outstanding shares increases, thereby reducing the existing shareholders' ownership percentage.** Simply put, the 'entire company pie' gets larger, but the 'existing shareholder's slice' becomes relatively smaller.
🔹 Principle of Equity Dilution (Example)
- Company A has 1 million outstanding shares, and shareholder B holds 100,000 shares (10%).
- The company issues an additional 1 million shares to raise new capital.
- The total number of shares becomes 2 million, but B's shares held remain at 100,000.
- **B's ownership percentage decreases to 100,000 ÷ 2,000,000 = 5%.** (Equity dilution occurs!)
🔹 Main Causes of Equity Dilution
- New Share Issuance: Issuing new shares through rights issues, bonus issues, etc.
- Exercise of Convertible Bonds (CBs) and Bonds with Warrants (BWs): When bonds are converted into shares or rights to subscribe to new shares are exercised.
- Exercise of Stock Options: When employees purchase company shares through granted rights.
- Use of stock-for-stock payment in mergers and acquisitions (M&A).
🔹 Impact of Equity Dilution
- Weakening of Existing Shareholder Voting Rights: Influence in company decision-making may decrease.
- Decline in Per-Share Value: As the number of shares increases, earnings per share (EPS) may decrease.
- Potential for Investor Trust Deterioration: Indiscriminate new share issuance can be a factor in stock price decline.
🔹 Is Equity Dilution Always Negative? (Key Point)
Although there is a short-term disadvantage of reduced ownership, **if the capital raised is effectively used to enhance company value through growth investments, debt repayment, or new business expansion, it can ultimately lead to stock price appreciation.** In other words, one must judge based on the company's growth potential.
🔹 Investment Tips:
- Check IR Materials and Disclosures: Develop a habit of carefully checking future capital increase plans and whether convertible bonds will be issued.
- Analyze Company's Funding Plans and Dilution Risks: Must check before investing.
3. Don't Miss Bitbunny AppTech!
Bitbunny is a reward-based AppTech that primarily focuses on daily step counting. You can acquire knowledge by solving quizzes and also collect Bitbunny coins, providing a double benefit.
- Coin Accumulation: Earn up to 100 coins for correct quiz answers!
- Coin Usage: Accumulated coins can be exchanged for various gift certificates, cultural gift vouchers, Naver Pay, Daiso gift certificates, and more.
Master Smart AppTech & Investment Knowledge with Bitbunny Quiz!
We hope today's Bitbunny quiz answer 'Equity Dilution' and the in-depth explanation have helped enhance your AppTech and investment knowledge. Gain new common sense daily through Bitbunny quizzes, consistently collect coins, and enjoy substantial benefits. We'll be back tomorrow with a new Bitbunny quiz!
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