Finance:Dilutive security
Dilutive securities are financial instruments—usually stock options, warrants, convertible bonds—which increase the number of common shares if exercised; this then reduces, or "dilutes", the basic EPS (earnings per share). [1] Thus, only where the diluted EPS is less than the basic EPS is the transaction classified as dilutive. [2] Compare Accretion.
Some examples of dilutive securities are convertible debt, convertible preferred stock, options, warrants, participating securities, two-class common stocks, and contingent shares.[3]
The concept of dilutive securities is often a purely theoretical one, since these instruments will not be converted into common stock unless the price at which they can be purchased will generate a profit. In many cases, the strike prices are set above the market price, so they will not be exercised.[4]
References
- ↑ Donald E. Kieso; Jerry J. Weygandt; Terry D. Warfield (4 October 2010). Intermediate Accounting: IFRS Edition. John Wiley & Sons. pp. 822. ISBN 978-0-470-61631-4. https://books.google.com/books?id=_tmMkC5DNuAC&pg=PA822.
- ↑ Eugene F. Brigham; Phillip R. Daves (24 February 2012). Intermediate Financial Management. Cengage Learning. pp. 781–. ISBN 978-1-111-53026-6. https://books.google.com/books?id=joxlJpPGgXIC&pg=PA781.
- ↑ Bragg, Steven M. (2009) (in en). Running a Public Company: From IPO to SEC Reporting. Hoboken, NJ: John Wiley & Sons. pp. 232. ISBN 978-0-470-52728-3. https://books.google.com/books?id=GbHtiClyJz0C&q=Dilutive+security&pg=PA232.
- ↑ Bragg, Steven (21 November 2018). "The Differences Between Dilutive Securities and Anti-Dilutive Securities" (in en). https://www.investopedia.com/ask/answers/102714/what-are-differences-between-dilutive-securities-and-antidilutive-securities.asp.
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