If you are an investor that owns shares in a firm that you believe is about to issue additional equity,then you would expect the price of your shares to

Question

Quizplus · Accepted Answer

When a firm issues additional equity, it dilutes the ownership stake of existing shareholders, which can lead to a decrease in the stock price. This is because the value of the company is now spread across more shares. Therefore, if you are an investor that owns shares in a firm that is about to issue additional equity, you should expect the price of your shares to decrease.

If You Are an Investor That Owns Shares in a Firm