Pending/Imminent Possibility of Share Dilution Explained
90% of the time, block holders who are passive investors of a company (e.g. mutual funds) vote in favor of board recommendations. Many of the major block holders of DDD as of recent SEC filings are passive investors requiring only the filing of 13G instead of 13D. Board members have more than 10% voting rights.
DDD recently requested that shareholders approve an increase in authorized shares from 120 million to 220 million (i.e. +83.3% increase in authorized shares).
The company recently issued a 3:2 stock dividend wherein 30.1M shares were newly issued (not dilutionary). Overall including dilutionary issuance of common shares used to fund acquisitions, as well as restricted shares used as compensation, the total float of DDD stock issued is estimated to be 102M shares out of 120M total that it is authorized to issue as of today.
This gives the company 18M more shares out of 120M that it can issue going forward. Lets call this 'spending power' of 15% capacity.
Before the split the company had 40% spending power (18+30.1 million not issued).
Proponents of the split will argue that increasing the issuance doesnt mean they will necessarily dilute. Some may even argue it merely restores spending power because it recently did the stock split.
But why should you suspect this move? You see, with an increase in 100M shares to 220M total, the company, even if you toy with the idea that they are just trying to restore original pre-split spending power, the spending power is now actually increased to 53.6% (100+18 million shares that it can issue out of 220M).
The company has now effectively done a 3:2 split yet asks for 83.3% increase in authorized shares, leading to an increased spending power from 40% originally in the pre-split context to now 53.6% spending power.
This is where your share dilution takes place, because the company all of a sudden gets more leeway than the current state.
This even assumes they wont just completely use new shares to dilute SH.
Thanks for opening this interesting disscusion of "dilution". I think a lot of good points have been hit.
I think that a lot of the DDD holders on this board probably do not understand the idea of dilution, and I hope they read this.
Now, of course, the point that has been raised is what does this mean? The company has more "spending power" as has been stated up form 40% to 53 some odd. . For a growing company, is 53% to much or too little? Are there M&A opportunities out there that the company ought to have "dry power" available for? Or is there a "poison pill" thought out there? What is our level of trust of management?
I have no clue as to the affect of this. I would think that the big holders mentioned here are doing homework.
Most of us are just along for the ride. and it is not pretty right now.
Look, like I said before---everyone knows you're shorting the stock, because if you were really so worried you wouldn't be holding the stock, and mercifully would be off this board. What do you want a company still looking for expansion and growth to do? Increase the number of shares available by 10 million? 20? 30? Generally companies will come up with these round numbers because they are simple and straightforward--but there is no indication that the shares are designated for any use, and it could be years before the company might even consider using them, and within a few years the company's cash balance would be much higher diminishing any need they may have now for additional shares---and when the value of the existing shares rises, the number of shares used or needed for any acquisition purposes decreases proportionately, so it is still in everyone's best interest for the stock price to increase and of course for the company to flourish. If I was a board member or a major insider holding a large block of stock I certainly wouldn't want to see the value of my holdings decrease, and I'm certain the company is not content with what has happened to the price of the stock during this drop. But, you really are being---to show my age--A BROKEN RECORD. Someone hit the damn record player and get past this!
Well the board isnt just for existing shareholders. I was a former shareholder and I am still here.
This is a constant back and fourth just like the stock market between bears and bulls. But you cannot deny the significant 30% downtrend that DDD has seen, leaving little good to be spoken of until they can even recover to their pre-earnings price.