PRC-3 · Chapter 4 · Question 35 of 65
What is a major disadvantage for original founders when they raise capital by issuing new ordinary shares to external investors?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) It causes a dilution of ownership and control
Explanation
Issuing new equity means bringing in new co-owners, which dilutes the voting power and profit share of the existing shareholders.
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