share issue

Here is the surprising part. When a company you already own shares in decides to issue more shares, it can actually make your existing shares worth less, even though the business itself has not lost a single naira. This feels backwards until you see why.

A share is really just a slice of a fixed pie. If a company that has issued 1,000,000 shares suddenly issues 500,000 more, the pie has not gotten bigger, it has just been cut into more pieces. Your slice, in percentage terms, has shrunk, even though you did nothing wrong and sold nothing.

This is called dilution, and it is the calm cost of a share issue for existing shareholders. Companies do it anyway because they need fresh money, perhaps to build a new factory, pay off debt, or expand into new markets, and selling new shares is often cheaper than borrowing from a bank.

A Nigerian example makes this real. Say a company on the Nigerian Exchange decides to issue new shares to fund an expansion into three new states. If you owned 2% of the company before, and the new shares are sold to other investors, your ownership might drop to 1.7%, even though you still hold the same number of shares you started with.

In the United Kingdom, this often happens through a rights issue, where existing shareholders get first offer on the new shares, at a discount, precisely to soften that dilution. For someone in the diaspora who sends money home to invest in a Nigerian company's shares, a share issue can be a chance to buy in at a good price, or a signal to watch closely, depending on why the company is raising the money.