Trading
Dilution
The reduction in each share's claim on the combined company caused by founder shares, warrants and rights.
A holder who stays through a combination is diluted by the founder block, by any warrants that get exercised, and by shares issued to the target and to PIPE investors.
The effect is amplified by redemptions: when most public shareholders take their cash, the fixed founder block becomes a much larger share of what remains.
Why it matters
Dilution is why the price of a de-SPAC so often drifts below $10 even when the underlying business is sound. The $10 was never a claim on a tenth of the company.
Related terms
Founder shares
The class of shares the sponsor buys before the IPO at nominal cost, typically 20% of the post-IPO share count.
Warrant
A right to buy a share at a fixed price, usually $11.50, exercisable only after a combination closes.
Redemption
A public shareholder's right to hand back shares for their pro-rata share of the trust, exercisable at a vote.
See the term in the wild: the screener shows trust size, per-share value and deadlines for every U.S. SPAC, and each profile links to the filings the numbers came from.
Definitions describe market practice and are not investment, legal or tax advice.