Stock Dilution: What It Means for the Stock Investor
Stock dilution occurs when the number of outstanding shares in a corporate entity are increased either through conversion of instruments that are deemed convertible or through outright issuance of additional shares. This leads to a reduction in earnings per share and controlling stake of the shareholders in the company. Stock dilution is the opposite of stock reconstruction, where a company moves to reduce its number of outstanding shares.
Best Stock Trading Brokers UK
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At FXCC, traders can access competitive spreads on major indices, including the Dow Jones, NASDAQ, and S&P 500. A notable limitation is the absence of individual stocks, which puts FXCC at a disadvantage compared to competitors like CMC Markets, known for offering thousands of shares.
Stock Exchanges Fractional Shares Leverage Dow Jones, Nasdaq, DAX GER 40 Index, FTSE UK Index, New York Stock Exchange, Euronext, CAC 40 Index France, Deutsche Boerse, SIX Swiss Exchange, Hong Kong Stock Exchange, Japan Exchange Group, Australian Securities Exchange (ASX) No 1:500 Stocks Spread Share Baskets Platforms NA No MT4, MT5 -
FxPro provides a robust range of stock CFDs with access to over 2,000 equities from major US and European exchanges, featuring companies such as Tesla and Apple. Additionally, the broker is expanding its offerings through BnkPro's e-money and investment products.
Stock Exchanges Fractional Shares Leverage Euronext, Hang Seng, FTSE UK Index, DAX GER 40 Index, CAC 40 Index France, Nasdaq, Dow Jones, IBEX 35, S&P 500 No 1:30 (Retail), 1:500 (Pro) Stocks Spread Share Baskets Platforms Variable No FxPro Edge, MT4, MT5, cTrader, AutoChartist, TradingCentral, DupliTrade, Quantower -
FOREX.com offers a variety of US, EU, and UK stock CFDs with spreads as tight as 1 point. Traders can explore both established brands and new IPOs, enhancing portfolio diversification opportunities. US stocks are available starting at 1.8 cents per share.
Stock Exchanges Fractional Shares Leverage Nasdaq, S&P 500, DAX GER 40 Index, FTSE UK Index, Australian Securities Exchange (ASX), Euronext, Hang Seng, CAC 40 Index France, Borsa Italiana, Japan Exchange Group, IBEX 35, SIX Swiss Exchange, Dow Jones, Hong Kong Stock Exchange No 1:30 Stocks Spread Share Baskets Platforms 0.14 No WebTrader, Mobile, MT4, MT5, TradingView -
IG provides access to over 13,000 shares for trading and investment, surpassing most rivals in the number of listed firms. The broker stands out with its zero commission policy on US shares. Additionally, out-of-hours trading unlocks more than 70 shares, alongside popular ETFs and trusts, even when markets are shut. They have also introduced an AI Index, highlighting opportunities in leading US firms specialising in artificial intelligence and machine learning, like Nvidia.
Stock Exchanges Fractional Shares Leverage SIX Swiss Exchange, Taiwan Stock Exchange, Toronto Stock Exchange, Tadawul, Deutsche Boerse, Japan Exchange Group, Shanghai Stock Exchange, Euronext, Hong Kong Stock Exchange, National Stock Exchange Of India, Australian Securities Exchange (ASX), Bombay Stock Exchange, London Stock Exchange, Dow Jones, S&P 500, IBEX 35, Borsa Italiana, Russell 2000, Korean Stock Exchange, Shenzhen Stock Exchange No 1:30 (Retail), 1:222 (Pro) Stocks Spread Share Baskets Platforms 0.02 Yes Web, ProRealTime, L2 Dealer, MT4, TradingView, AutoChartist, TradingCentral, ProRealTime -
Eightcap provides over 590 shares from the US, Australia, and Europe alongside a select range of indices, such as the Dow Jones and FTSE. Their Labs include first-rate educational resources, especially the ‘Navigating Stock Market Volatility’ guide. However, they do not yet offer fractional shares for budget traders, unlike brokers like XTB.
Stock Exchanges Fractional Shares Leverage New York Stock Exchange, CAC 40 Index France, DAX GER 40 Index, London Stock Exchange, Australian Securities Exchange (ASX), Euronext, FTSE UK Index, Japan Exchange Group, Dow Jones, Nasdaq, Hang Seng, Hong Kong Stock Exchange, S&P 500, Russell 2000, Toronto Stock Exchange, SIX Swiss Exchange No 1:30 Stocks Spread Share Baskets Platforms 0.03 (Apple Inc) No MT4, MT5, TradingView -
eToro provides access to a vast range of shares from Europe, the US, and more, including Dubai's leading stocks from 2024. Traders can either operate independently or engage with eToro's vibrant community of millions. Long-term investors might explore the broker's Smart Portfolios, featuring thematic collections such as Big Tech.
Stock Exchanges Fractional Shares Leverage SIX Swiss Exchange, Euronext, Deutsche Boerse, Japan Exchange Group, Shanghai Stock Exchange, New York Stock Exchange, Hong Kong Stock Exchange, Australian Securities Exchange (ASX), Korean Stock Exchange, London Stock Exchange, FTSE UK Index, S&P 500, DAX GER 40 Index, Dow Jones, CAC 40 Index France, National Stock Exchange Of India, Tokyo Commodity Exchange, IBEX 35, Hang Seng, Russell 2000, Borsa Italiana, Taiwan Stock Exchange, Nasdaq, Nasdaq Nordic & Baltics, Dubai Financial Market Yes 1:30 Stocks Spread Share Baskets Platforms 0.57 (Apple) Yes eToro Web, CopyTrader, TradingCentral -
City Index provides access to over 4,700 shares from major stock exchanges through CFDs and spread betting, featuring prominent companies such as Tesla and Apple. Traders can also engage in pre-market and after-hours trading on more than 70 US stocks. Additionally, the platform excels in offering indices aligned with emerging consumer interests, like AI, NFTs, and ESG criteria.
Stock Exchanges Fractional Shares Leverage London Stock Exchange, New York Stock Exchange, Nasdaq, Hong Kong Stock Exchange, Euronext, Australian Securities Exchange (ASX), Borsa Italiana, SIX Swiss Exchange, FTSE UK Index, DAX GER 40 Index, Dow Jones, CAC 40 Index France, Hang Seng, IBEX 35, Russell 2000, S&P 500 No 1:30 Stocks Spread Share Baskets Platforms Variable Yes Web Trader, MT4, TradingView, TradingCentral
Safety Comparison
Compare how safe the Stock Dilution: What It Means for the Stock Investor are and what features they offer to protect traders.
Broker | Trust Rating | FCA Regulated | Negative Balance Protection | Guaranteed Stop Loss | Segregated Accounts |
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FXCC | ✘ | ✔ | ✘ | ✔ | |
FXPro | ✔ | ✔ | ✘ | ✔ | |
Forex.com | ✔ | ✔ | ✘ | ✘ | |
IG Index | ✔ | ✔ | ✔ | ✔ | |
Eightcap | ✔ | ✔ | ✘ | ✔ | |
eToro | ✔ | ✔ | ✘ | ✔ | |
City Index | ✔ | ✔ | ✔ | ✔ |
Payments Comparison
Compare which popular payment methods the Stock Dilution: What It Means for the Stock Investor support and whether they have trading accounts denominated in British Pounds (GBP).
Broker | GBP Account | Debit Card | Credit Card | Neteller | Skrill | Apple Pay |
---|---|---|---|---|---|---|
FXCC | ✔ | ✔ | ✔ | ✔ | ✔ | ✘ |
FXPro | ✔ | ✘ | ✔ | ✔ | ✔ | ✘ |
Forex.com | ✔ | ✔ | ✔ | ✔ | ✔ | ✘ |
IG Index | ✔ | ✔ | ✔ | ✘ | ✘ | ✘ |
Eightcap | ✔ | ✔ | ✔ | ✔ | ✔ | ✘ |
eToro | ✔ | ✔ | ✘ | ✔ | ✔ | ✘ |
City Index | ✔ | ✔ | ✔ | ✘ | ✘ | ✘ |
Mobile Trading Comparison
How good are the Stock Dilution: What It Means for the Stock Investor at mobile trading using apps or other mobile interfaces.
Broker | Mobile Apps | iOS Rating | Android Rating | Smart Watch App |
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FXCC | iOS & Android | ✘ | ||
FXPro | iOS & Android | ✘ | ||
Forex.com | iOS & Android | ✘ | ||
IG Index | iOS & Android | ✔ | ||
Eightcap | iOS & Android | ✘ | ||
eToro | iOS & Android | ✘ | ||
City Index | iOS & Android | ✘ |
Beginners Comparison
Are the Stock Dilution: What It Means for the Stock Investor good for beginner traders, that might want an affordable setup to get started, along with good support and educational resources?
Broker | Demo Account | Minimum Deposit | Minimum Trade | Support Rating | Education Rating |
---|---|---|---|---|---|
FXCC | ✔ | $0 | 0.01 Lots | ||
FXPro | ✔ | $100 | 0.01 Lots | ||
Forex.com | ✔ | $100 | 0.01 Lots | ||
IG Index | ✔ | $0 | 0.01 Lots | ||
Eightcap | ✔ | £100 | 0.01 Lots | ||
eToro | ✔ | $50 | $10 | ||
City Index | ✔ | $0 | 0.01 Lots |
Advanced Trading Comparison
Do the Stock Dilution: What It Means for the Stock Investor offer features that allow for more advanced trading strategies?
Broker | Automated Trading | Pro Account | Leverage | VPS | AI | Low Latency | Extended Hours |
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FXCC | Expert Advisors (EAs) on MetaTrader | ✘ | 1:500 | ✔ | ✘ | ✔ | ✘ |
FXPro | Expert Advisors (EAs) on MetaTrader, cBots on cTrader | ✔ | 1:30 (Retail), 1:500 (Pro) | ✔ | ✘ | ✔ | ✘ |
Forex.com | Expert Advisors (EAs) on MetaTrader | ✘ | 1:30 | ✔ | ✔ | ✔ | ✘ |
IG Index | Expert Advisors (EAs) on MetaTrader, build your own on ProRealTime | ✔ | 1:30 (Retail), 1:222 (Pro) | ✔ | ✘ | ✔ | ✔ |
Eightcap | TradingView Bots | ✘ | 1:30 | ✔ | ✘ | ✔ | ✘ |
eToro | Automate your trades via CopyTrader - follow profitable traders. Open and close trades automatically when they do. | ✘ | 1:30 | ✘ | ✔ | ✘ | ✔ |
City Index | Expert Advisors (EAs) on MetaTrader | ✔ | 1:30 | ✘ | ✔ | ✔ | ✔ |
Detailed Rating Comparison
Use this heatmap to compare our detailed ratings for all of the Stock Dilution: What It Means for the Stock Investor.
Broker | Trust | Platforms | Mobile | Assets | Fees | Accounts | Support | Research | Education |
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FXCC | |||||||||
FXPro | |||||||||
Forex.com | |||||||||
IG Index | |||||||||
Eightcap | |||||||||
eToro | |||||||||
City Index |
Our Take On FXCC
"FXCC remains a top choice for forex traders, offering over 70 currency pairs, very tight spreads from 0.0 pips in tests, and high leverage up to 1:500 with the ECN XL account."
Pros
- The complimentary education section, featuring the 'Traders Corner' blog, provides a wide array of resources suitable for traders of all experience levels.
- There are no deposit fees other than standard cryptocurrency mining charges, which benefits active traders.
- FXCC has introduced MT5, which in our evaluations, mirrored the trading conditions of MT4 by offering swift execution, improved charting, and market depth tools.
Cons
- The range of research tools, such as Trading Central and Autochartist, is quite limited. Leading platforms in this category, like IG, offer more advanced features.
- The variety of currency pairs surpasses most options, but the choice of other assets is limited. Notably, stocks are absent.
- FXCC's exclusive MetaTrader platform is a limitation, especially when compared to more versatile options like AvaTrade, which offers five different platforms to cater to various trader needs.
Our Take On FXPro
"FxPro is an excellent choice for traders, offering swift execution speeds under 12ms, reduced fees since 2022, and outstanding charting platforms like MT4, MT5, cTrader, and FxPro Edge."
Pros
- FxPro provides four dependable charting platforms, including the user-friendly FxPro Edge. It features more than 50 indicators, 7 types of charts, and 15 different timeframes.
- FxPro uses a 'No Dealing Desk' (NDD) model for swift and transparent order execution, usually within 12 milliseconds, making it well-suited for short-term trading strategies.
- FxPro's Wallet is a notable feature enabling traders to securely manage their funds. It ensures additional protection and ease by separating unused funds from active trading accounts.
Cons
- FxPro offers customer support five days a week around the clock, accessible via various platforms, and the service quality is reliable based on tests. However, the absence of weekend support can be a drawback for traders requiring help beyond standard market times.
- There are no passive investment options such as copy trading or interest on cash. While traders might not find these essential, competitors like eToro, which accommodate both active and passive investors, offer more extensive services.
- FxPro, with its $10M funded demo account and expanding Knowledge Hub, mainly caters to experienced traders. Beginners might find its account and fee structure challenging to understand.
Our Take On Forex.com
"FOREX.com excels in serving traders of all levels, offering more than 80 currency pairs, spreads starting at 0.0 pips, and competitive commissions. Its robust charting platforms provide over 100 technical indicators and comprehensive research tools."
Pros
- With more than two decades of expertise, strong regulatory governance, and numerous accolades, including a second-place finish in our 'Best Forex Broker' awards, FOREX.com is globally renowned as a reliable trading platform.
- The in-house Web Trader remains a standout platform, excellently crafted for budding traders. It features a sleek design and offers more than 80 technical indicators for thorough market analysis.
- FOREX.com provides top-tier forex rates beginning at 0.0 pips, along with attractive cashback rebates up to 15% for dedicated traders.
Cons
- FOREX.com's MT4 platform provides around 600 instruments, a notable reduction compared to the more than 5,500 options on its other platforms.
- Demo accounts are typically limited to 90 days, hindering effective strategy testing.
- US clients are not protected against negative balances, which means you could end up owing more than your initial deposit.
Our Take On IG Index
"IG offers a complete package with an intuitive online platform, top-tier beginner education, advanced charting tools through its TradingView integration, real-time data, and swift execution for seasoned traders."
Pros
- The web-based platform supports traders at every level, offering advanced charting tools and real-time market data vital for trading. Additionally, IG now includes TradingView integration.
- As a seasoned broker, IG adheres to stringent regulatory standards across various regions, ensuring significant trust.
- The IG app provides an excellent mobile trading experience with an intuitive design, earning it the Runner Up position in our 'Best Trading App' award.
Cons
- IG has ended its swap-free account, diminishing its attractiveness to Islamic traders.
- Based on tests, stock and CFD spreads remain less competitive than the lowest-cost brokers, such as CMC Markets.
- Beginners may find IG's fees complicated, as they vary depending on the trades or services. This could cause confusion and unexpected costs.
Our Take On Eightcap
"Eightcap excels for traders, offering diverse charting platforms, educational Labs, and AI tools. With over 120 crypto CFDs, it stands out in crypto trading and has won our 'Best Crypto Broker' award twice consecutively."
Pros
- In 2021, Eightcap enhanced its lineup, now providing an extensive range of cryptocurrency CFDs. It offers crypto/fiat and crypto/crypto pairs, along with crypto indices for comprehensive market exposure.
- Eightcap excels with a suite of advanced trading tools, such as MT4 and MT5, and has recently joined the 100-million-user social trading network, TradingView.
- Eightcap has excelled in all essential trading areas, surpassing all rivals to clinch our 'Best Overall Broker' award for 2024. It also earned the titles of 'Best Crypto Broker' and 'Best TradingView Broker' for 2025.
Cons
- Eightcap must enhance its range of over 800 instruments to rival top competitors like Blackbull Markets, which offers 26,000+ assets, especially improving its limited commodities selection.
- Despite a helpful array of educational guides and e-books in Labs, Eightcap lags behind IG's extensive resources for aspiring traders. IG boasts a dedicated Academy app and features 18 diverse course categories.
- The demo account is available for 30 days, after which it requires a request for extension. This is less convenient than XM's offering, which provides an unlimited demo mode.
Our Take On eToro
"eToro's social trading platform excels with its outstanding user experience and lively community chat, aiding beginners in spotting opportunities. It offers competitive fees on numerous CFDs and real stocks, alongside exceptional rewards for seasoned strategists."
Pros
- In 2025, eToro altered its fee structure by separating crypto trading fees from the spread. A distinct commission is now listed separately, providing traders with increased transparency while maintaining consistent overall costs.
- Utilising TradingView, the charts provide robust tools for technical analysis, featuring nine chart types and more than 100 indicators.
- eToro now offers accounts in EUR and GBP, with recent additions of BTC and ETH payment options. This reduces conversion costs and delivers a tailored trading experience.
Cons
- The absence of extra charting platforms such as MT4 may deter experienced traders who rely on external software.
- The only significant contact option, besides the in-platform live chat, is limited.
- The minimum withdrawal is set at $30, accompanied by a $5 fee. This may impact traders with limited funds, particularly those just starting out.
Our Take On City Index
"City Index suits active traders perfectly, offering rapid execution speeds averaging 20ms and a customisable web platform with over 90 technical indicators. Its educational resources are exceptional. For UK traders interested in spread betting on 8,500+ instruments tax-free, City Index is an excellent option."
Pros
- City Index offers adaptable trading platforms suited to every expertise level. For newcomers, the Web Trader platform is straightforward and user-friendly. For more in-depth analysis and automated features, MetaTrader 4 (MT4) and TradingView are supported, providing a comprehensive trading experience for all traders.
- City Index offers access to over 13,500 markets, including forex, indices, shares, commodities, bonds, ETFs, and interest rates. The platform's inclusion of niche markets such as interest rates provides traders with unique opportunities not commonly available on other platforms.
- City Index is under the regulation of leading authorities, such as the FCA in the UK, ASIC in Australia, and MAS in Singapore. Its parent company, StoneX Group Inc., is publicly listed, which enhances its credibility.
Cons
- Although many brokers, such as eToro, have broadened their crypto offerings, City Index restricts its clients to crypto CFDs. This limited selection may not meet the needs of traders seeking a wider variety of altcoins.
- Unlike brokers like AvaTrade and BlackBull, City Index lacks options for passive trading, such as social copy trading or real ownership of stocks and ETFs. This limitation may reduce its appeal to traders seeking a more hands-off approach.
- City Index does not offer an Islamic account with swap-free conditions, making it less attractive to Muslim traders than brokers such as Eightcap and Pepperstone.
How Stock Dilution Occurs
The main reason behind any stock dilution is either to raise capital, or to conserve cash. There are three common ways by which stock dilution occurs:
a) During a public offering, shares are created out of existing shares so that a percentage of the company can be sold to the general public.
b) Certain assets are deemed to be convertible. Warrants, options, rights and convertible bonds can be converted into stocks. This usually requires some exchange of money and that is why companies who are in need of finance do not mind giving out some of their stock in exchange for convertible derivatives.
c) In some situations, a company may decide to either reward or compensate its workers in other methods apart from cash. An easy way to save that cash is to simply give out part ownership of the company in the form of stock options.
Now that we have an idea of what stock dilution is all about, whay are we even talking about it? What does a stock dilution mean to a stock investor?
A stock dilution has an impact on the value of the investor’s shareholdings as well as the value of the stock price in the following ways:
- There is a reduction in the earnings per share of the stock investment.
- Stock dilution reduces the controlling power of existing investors.
- The share price of the stock will drop.
- Reduction in market value of the shares in question.
Reduction in EPS
A reduction in the earnings for every share held by a shareholder is a common scenario seen in companies that use stock options as a method of reward or compensation to employees. Indeed anytime there is conversion of convertible derivatives into common stocks, there is a reduction in the degree of earnings that a share can produce.
Reduction in Controlling Power of Investors
When stock dilution occurs, the control that existing shareholders have over the company is equally diluted. Where a few persons were in total control of the activities in the company, a diluted stock situation now brings in other shareholders, many of whom have no idea of the company’s ideals or direction and whose interests may not necessarily be that of the company. This was the situation that caused the exit of Steve Jobs from the company he founded.
Stock dilutions can impact negatively on the process by which decisions are taken in the affected company, especially if the new shareholders have voting rights that give them the power to move away from the policy direction of the original shareholders.
Reduction in Market Value/Share Price
With so many shares created, there is a supply-demand imbalance which can cause the price of the stock to drop, especially if workers who have been compensated with stock options decide to cash out their holdings.
Another scenario is seen in the Pink Sheets/OTCBB markets, where companies with nano-priced stocks sometimes engage in follow-on offerings. The company founders issue additional shares and sell to the public as a means of making money, and then engage in reverse-stock splits, which end up ballooning the number of outstanding shares. Since the money realised from such secondary stock offerings is never really channelled into any productive ventures that will increase the company’s earnings, the end-result is a dampening of the value of the stocks of these companies.
Another example of reduction in market value and share price as a result of stock dilution is seen during an acquisition process. Acquisitions can be done using cash-only, cash + stock options or 100% stock options payment models. Acquisitions that utilize stock options usually leave the new entity with an increased number of outstanding shares which could potentially lead to a value dilution.
How to Get Around Stock Dilution
Unfortunately, stock dilutions are an integral part of many companies in the corporate world, and in some places, it is seen as a right and part of the welfare package for workers. If you are investing in such companies, then there is almost no way to get around stock dilutions. This means that for such an investment to become really profitable, the company’s earnings has to outperform the value reduction brought on by the stock dilution process.
As such, there are questions that an investor in a company with diluted shareholdings must ask?
a) What is the capital generated by a primary or secondary offering to be used for? This is a dilemma that current Facebook shareholders are facing. Without a solid model for mobile advertising in place to maximally monetize its close to 900million users, the stock price of Facebook has lost close to 40% of its value since its IPO. Before investing in a company with a diluted shareholding, make sure there is a solid revenue model in place that will outperform the expected value reduction caused by the dilution.
b) What are the fundamentals of the company? Is there a product which will command marketplace demand? Companies like Google and Apple have all had IPOs and secondary offerings, but because these companies have solid products that command marketplace attention, the stocks have outperformed any dilutional value reductions they incurred during their share offerings.
This is why it is very important to engage the services of professionals before buying any stock. The information that can be gained from such services is invaluable, as it can prevent an investor from putting his or her money into a drainpipe.