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QuestionsCategory: Management QuadrantCalculating Dilution of Shares (APEX Healthcare ESOS as example). How much % will be redflag of dilution / pump & dump?
Yong asked 3 years ago

Hi, I’m taking latest Apex Healthcare Exec. Share Option Scheme as example. Please correct if my calculations/terms/understanding below is inaccurate.
And at what % of share capital dilution we should be alarmed and be aware of possible pump & dump through future date exercising of share options/warrants?
Corporate Proposal:
ESOS – 70,000 shares at @ RM3.36 issue price
Post-corporate proposal:
Total issued shares = 117,781,093 units
Total share capital = RM119,781,978
Per share capital prior to ESOS:
= [RM119,781,978 – (RM3.36 x 70,000)]/(117,781,093 – 70,000)
= (RM119,781,978 – RM235,200)/117,711,093
= RM1.0156 per share capital

Per share capital post ESOS:
= RM119,781,978/117,781,093
= RM1.0169 per share capital
Based on above, dilution did not happen. Shareholders gained:
= (RM1.0169 – RM1.0156)/RM1.0156 x 100%
= 0.13%

1 Answers
Victor Chng answered 3 years ago

Hi Yong,
 
I look at dilution based on the number of shares issue over their existing number of share.
 
For your case of Apex Healthcare, the number of share possible to issue is 70,000 while the number of share is 117,781,093. Hence, the new issue shares is only 0.06% of the actual number of shares. It is a very small amount. 
 
There is no fixed rule to the number of dilution but if I see one person being issue 10% of the shares outstanding then it does raise a red flag for me.

Yong replied 3 years ago

Thanks, Victor have a better idea of what dilution of shares % means now. :)

Based on their announcement, post-ESOS, the total of shares will stand at = 117,781,093 units. Hence, do we based on the new amount or need to subtract 70,000 from the post-ESOS?

Victor Chng replied 3 years ago

Hi Yong,

To be conservative, I usually include possible future dilution into the outstanding shares.