future earnings dilution issue. The fact that PZN
is issuing new shares to HSBC only dilutes your
investment to the extent that HSBC pays less per share than
you paid.
For example, (I apologize for the
simplistic example; I need things to be simple)if you and I
start a business with each of us putting in $1 million
and each of us having one share we each own 50% of a
business that has a net worth $2 million. If we allow in
two additional shareholders each putting in $1
million and each getting one newly issued share, You now
own 25% of a business worth $4 million, same as
before.
This example assumes the additional $2 million put in
by our partners will generate the same returns to
our business as our original $2 million did.
If the marginal returns on newly invested capital
equals our previous returns and if we sell equity at the
same cost we paid there is no dilutive effect.