Dilutive Action question

I have a question regarding this review question:

So I think I have a pretty good grasp on rights and warrants. However, I don’t see how the issuance of rights is not a dilutive action. I mean, I get that it’s not dilutive for those individuals who take advantage of the rights offering. However, for the investors that choose to not exercise their rights but let them expire, it would be dilutive for them, correct? More shares are being issued, so that would be considered dilutive in my mind…

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Hi @Gray - your thinking is totally on point here. However, we consider an action non-dilutive as long as a shareholder was provided the opportunity to maintain their proportionate ownership. Of course, a rights holder that either trades or allows rights to expire will eventually get diluted. However, we measure dilution more by opportunity than it actually occurring.

I hope this helps!

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Yep, that makes sense! Thanks!

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