The issuance of convertibles will ultimately lead to greater dilution than an initial issue of stock.

Question

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Convertible securities, such as convertible bonds or preferred shares, can be converted into a predetermined number of common shares. This means that as more convertibles are converted into common shares, the number of outstanding shares and the ownership percentage of existing shareholders will decrease, resulting in greater dilution than an initial issue of stock.

The Issuance of Convertibles Will Ultimately Lead to Greater Dilution