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 means that there will be more shares available in the market, which leads to dilution of the ownership of the existing shareholders. This dilution reduces the value of each share, which may lead to a decrease in the price of the shares. Hence, an investor who owns shares in a firm that is about to issue additional equity would expect the price of their shares to decrease.

If You Are an Investor That Owns Shares in a Firm