This tool helps you calculate how much equity you will own after new shares are issued.
How to Use the Equity Dilution Calculator
To use the Equity Dilution Calculator, fill in the following fields:
- Initial Shares: The number of shares you currently hold.
- Initial Share Price: The price per share before any new investment.
- New Investment Amount: The amount of the new investment coming in.
- New Investor Shares: The number of shares the new investor will receive.
Once you have filled in all the fields, click the “Calculate” button to see the results.
Explanation of the Calculations
The calculator works by assessing the impact of new investment on the company’s shares and overall valuation:
- Post-money Valuation: This is calculated by multiplying the total number of shares (existing and new) by the initial share price.
- Ownership Dilution: This represents the percentage of ownership lost due to the new investor’s shares. It is calculated as (new investor shares / total shares) * 100.
Limitations
The Equity Dilution Calculator does not take into account factors such as:
- Future investments or rounds of funding.
- Different classes of shares that may affect voting power or dividend rights.
- The actual negotiated share prices which may differ from the initial share price.
This calculator is meant to provide a simple and straightforward way to understand equity dilution based on basic inputs.
Use Cases for This Calculator
Calculate Dilution Percentage for Issuing New Shares
Enter the current number of shares outstanding, the number of new shares to be issued, and the total new shares after issuance to instantly know the dilution percentage. This will help you understand the impact of adding more shares on existing shareholders’ ownership.
Estimate Ownership Percentage After Convertible Note Conversion
Input the existing shares outstanding, the amount of the convertible note, and the conversion price per share to determine the ownership percentage after conversion. This calculation can give you insights into how much ownership will be diluted when the convertible note is converted into shares.
Calculate Dilution Impact for Employee Stock Options
Enter the current number of shares outstanding, the number of shares reserved for employee stock options, and the number of options granted to calculate the dilution impact on existing shareholders. This can help you evaluate the effect of stock option grants on ownership percentage.
Estimate Dilution Percentage from Preferred Stock Conversion
Input the number of shares outstanding, the number of preferred shares converting to common shares, and the total shares outstanding post-conversion to estimate the dilution percentage. This calculation enables you to determine the impact of preferred stock conversion on ownership percentage.
Calculate Dilution Effect of Warrants Exercise
Provide the current outstanding shares, the number of warrants exercised, and the total shares outstanding after warrant exercise to calculate the dilution effect. This can help you foresee how the exercise of warrants will dilute existing shareholders’ ownership.
Estimate Ownership Percentage After Series A Financing
Enter the existing share structure, the new investment amount, and the pre-money valuation to estimate the ownership percentage post-Series A financing. This calculation helps you understand the dilution impact of bringing in new investors through Series A funding.
Calculate Anticipated Dilution from Stock Splits
Input the current number of shares outstanding, the split ratio, and the expected total shares after the split to calculate the anticipated dilution. This can help you visualize how stock splits can dilute ownership percentages among existing shareholders.
Estimate Ownership Percentage After Rights Offering
Provide the current shares outstanding, the number of shares offered in the rights issue, and the total outstanding shares post-offering to estimate the ownership percentage. This will give you insights into how rights offerings can dilute existing shareholders’ ownership.
Calculate Dilution Impact for Convertible Preferred Stock
Enter the existing shares outstanding, the number of convertible preferred shares, and the conversion ratio to determine the dilution impact on ownership percentage. This can help you evaluate the dilution effect of converting preferred stock into common stock.
Estimate Ownership Percentage After a Merger or Acquisition
Input the total shares outstanding for both companies pre-merger, the ratio for the merger, and the anticipated post-merger shares to estimate the ownership percentage. This calculation can help you understand the ownership dilution resulting from a merger or acquisition.