A decrease in the equity of a share of stock after a company issues additional shares, whether in raising more capital or upon exercise of convertibles or embedded options. Normally, dilution is in the disinterest of, and harmful to, existing shareholders because it reduces their proportional claim on earnings and assets. Issuance of new shares results in an increased number of outstanding shares without a equivalent increase in equity. As more shares chase the same pie, incumbent shareholders lose a portion of the pie to the new shareholders and get no compensation. However, dilution can be avoided if a company provides current shareholders with a rights issue which helps them maintain their proportionate ownership.