$UAMM 00 DILUTION!! Dilution is the issuance of more shares without a subsequent increase in the value of the company, normally this involves selling common stock on the open market. There are many ways of dilution in penny stocks, but in almost every case the value of the shares that existing shareholders have drops.

What is important is that dilution increases the number of shares that are out in the market. More shares means more liquidity, but it also means that a stock can be harder to move. Every tick in the share prices means far more money. A stock that has 500 million shares that trades at $0.10 is a $50 million dollar company. It might not seem like much when you compare it to a lot of the famous companies, but for a penny stock that is a crazy valuation.

The more shares there are the harder it is to move the stock, because the amount of money needed to make a dent increases. For existing shareholders, dilution devalues their existing shares and makes it harder to get back to the place they were. It also looks bad for the company. Having a gap between the O/S and the A/S can mean that dilution is a possibility. A stock that is maxed out needs paperwork to sell more shares. It is a favorite of small time promoters or momentum groups to use maxed out companies, since the company cannot ruin anything by selling shares into any run.