Claim Dilution
Claim dilution occurs when the issuance of new debt or equity reduces the value or priority of existing claims. This dilution can affect creditors, shareholders, or other stakeholders, often lowering the recovery potential in the event of a liquidation. Protecting against claim dilution is crucial for investors to maintain their expected returns and priority in capital structures.
Key Takeaways
- New issuances reduce the value or priority of existing claims.
- Affects creditors, shareholders, and stakeholders.
- Lowers recovery potential in liquidation.
- Investors must safeguard against dilution in capital structures.
