Dilution I'd like to expand on yesterday's posting which touched on this subject. One specific poster on this board seems to think it's a tragedy whenever any shares are issued, but specifically when options and warrants are converted.
Firstly, I should point out that cash received when others convert options and warrants has helped the company to survive until revenue and collections traction kicks in. So, to argue against conversions is to argue against the company even existing.
Secondly, getting upset when the conversions take place is senseless because that's not when the dilution actually happens. The potential for dilution happens when the options or warrants are issued. And the actual dilution occurs when the market price of the stock exceeds the exercise price of the individual options and warrants. So, I get it if someone doesn't like stock option grants to insiders (especially if the company is already viable) and I get it if someone doesn't like warrants attached to stock sales, but to argue against the conversion of these derivatives at the time they are exercised is to argue against the stock price going up.
Thirdly, the point of actual conversion is a non-event in terms of dilution, since this has already happened as described above. It is not a non-event, however, in terms of the company's cash position, which means that, overall, the point of conversion is a good thing for the company and its shareholders.
I'm sure none of this will stop that irrational poster from offering reminders whenever derivatives are exercised, but I'm hoping everyone will be able to put this into perspective from now on.
As we all know, that same poster offers occasional projections of revenue, expenses and profitability. Notice that he doesn't generally include any net new share issuances in his future estimates. This, of course, is just more silliness since it's obvious these net new issuances will continue to happen up until the point when the company's cash flow is so positive that share buy backs are likely.
I could have mentioned the psychological effects that prolonged, extreme negativity has on people, but I think mingzhu covered the basics on that. And thanks, Invester123, for the suggestion. I'll consider it.