Why do companies opt for equity dilution rather than other means of funding? Companies can issue new shares to raise capital, pay for acquisitions, provide bonuses to employees or fund growth. The reason for stock dilution is that the total number of outstanding shares rises, which may lead to a fall in the ownership percentage of existing shareholders. Investors should look at the company's plans for the new capital when shares are being diluted. With this definition of dilution in mind, shareholders can assess if a new share sale will provide long-term support for growth.