The evidence indicates that,on average,a company's stock price declines when it announces a new issue of equity.

Question

Quizplus · Accepted Answer

This is a well-established phenomenon known as "share dilution" or "stock dilution." When a company issues new shares of stock, it can often lead to a decrease in the value of each individual share, as the total value of the company is now spread across more shares. This can be seen as a negative signal to investors, as it suggests that the company is in need of additional funds and may be struggling financially. Of course, there are exceptions to this trend, and many companies are able to issue new shares without significantly impacting their stock price, but as a general rule, the evidence supports the idea that new equity offerings tend to drive down stock prices in the short term.

The Evidence Indicates That,on Average,a Company's Stock Price Declines When