Free course · Lesson 1 · 4 min
What dilution is and why it moves the price
In 4 minutes: what dilution is, why it moves the price, and where to start on Panda Desk.
Next to the text is Panda Desk, the real app. As you read, the part we talk about lights up.
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01More shares, same company
Dilution is a company creating new shares. Every share that already exists then owns a smaller slice of the company.
About 1.6x the shares, for one company.
02Supply against demand
A price is where shares for sale meet buyers. New shares add supply; if buyers do not grow too, the price drops until it finds more.
03Why small caps dilute
Many small caps spend more cash than they bring in. When the cash runs low, they sell new shares to pay for the next months.
04Start here: Overall Dilution Risk
Panda Desk sums up the risk of new shares in one grade. PNDA reads High.
05Where the new shares come from
DILUTION INSTRUMENTS lists each way PNDA can create shares. Later lessons open them one by one.
2.14M in all. Not counted: two warrant rows above 10x the price, and the Shelf and ATM, which are sized in dollars.
063 checks for any small cap
Sources
- Form 10-Q: the cover page reports the shares outstanding of each class of common stock.
- 17 CFR 230.415: shelf registration, the rule behind the Shelf and ATM rows.
Panda Desk shows these rows for any small cap, next to your montage. tspanda.com
Not financial advice. PNDA is fictional, and nothing here is a recommendation to buy or sell.