PRC-3 · Chapter 4 · Question 64 of 65
What is the primary disadvantage faced by the original founders of a business when they raise massive amounts of capital by continually issuing new ordinary shares to external investors?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Their ownership percentage and voting control of the company is significantly diluted
Explanation
Issuing new equity introduces new co-owners, which dilutes both the voting power and the share of future profits held by the original founders.
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