Dilution

I. Formal Definition

The reduction in the ownership percentage held by existing equity holders as a result of new share issuance. Dilution is computed on both a basic and a fully diluted basis, the latter including all outstanding options, warrants, convertible notes, and similar instruments. The federation rejects dilution disclosures that exclude in-the-money convertibles and requires a fully diluted share count to be published quarterly under MEV-Annex:4.1. Anti-dilution provisions, including weighted average and ratchet mechanics, are disclosed with their potential effects under each round.

II. Etymology

From the Latin diluere, to wash away; the financial sense entered English in early twentieth century corporate practice.

III. Federation Usage

Federation members publish a fully diluted share table quarterly with all anti-dilution mechanics modelled. Concealment of effective dilution from convertibles or earnouts is a Tier-1 conduct violation under TGS-002:2.3.

IV. Related Terms

• equity
• paid-in-capital
• capital-stack
• venture-capital

V. Authoritative Citations

• UFMS-001:3.1UFMS Article III - Dilution Disclosure
• MEV-Annex:4.1MEV Annex IV - Fully Diluted Reporting

VI. Citation in BibTeX

@misc{ifo4_glossary_dilution,
  title        = {{Dilution}},
  author       = {{IFO4 Federation Editorial Board}},
  howpublished = {{IFO4 Federation Glossary, slug \texttt{dilution}}},
  year         = {2026},
  url          = {https://ifo4.org/glossary/dilution},
  note         = {Category: Capital; key: Dilution}
}

VII. Challenge This Definition

Federation members and accredited practitioners may challenge any entry under TGS-002:1.7. Filed challenges are routed to the editorial board, triaged into the revision register, and resolved in writing on the public docket. The slug remains stable through any revision.