Quote:
Originally Posted by t8v6
noob question here.
I know issuing new shares causes dilution and may decrease the PPS of a stock. What about new issuance of warrants and options though? How does that affect PPS?
|
New share offering isn't necessary dilutive. Technically, an offering is defined as dilutive if the end result is a decrease in EPS. If the return from the funds raised through the offering is used in an investment that is greater than the firm's subsequent WACC, it would be accretive. In addition, an equity offering may move the firm to a more optimal capital structure that results in a lower WACC; consequently, that would also be accretive.