What potential dilution impact will the issuance of 30,000,000 new shares have on existing shareholders' ownership percentages and EPS?
Answer
The secondary offering will add 30 million new common‑stock shares to CCC Intelligent Solutions Holdings Inc. (NASDAQ: CCCS).
The dilution that existing shareholders experience depends on how many shares are already outstanding. The company’s most recent SEC filing (e.g., its 10‑K or 10‑Q) lists the current “common‑stock shares outstanding.” Because the press release does not repeat that number, we have to use the figure that is publicly available at the time of the offering and then show the calculation so you can plug in the exact number you see in the filing.
Below is a step‑by‑step illustration of the dilution impact, using the typical range of shares outstanding for CCCS (≈ 100 million shares) as an example. If the actual outstanding share count is different, simply replace the 100 M figure in the formulas and the percentages will adjust accordingly.
1. Dilution of Ownership Percentages
| Shares | % of Total Shares | |
|---|---|---|
| Existing shares (pre‑offering) | E | E / (E + 30 M)* |
| New shares (offering) | 30 M | 30 M / (E + 30 M) |
| Total shares after offering | E + 30 M* | 100 % |
If E = 100 M (typical estimate):
| Shares | % of Total | |
|---|---|---|
| Existing shares | 100 M | 100 M / 130 M ≈ 76.9 % |
| New shares (offering) | 30 M | 30 M / 130 M ≈ 23.1 % |
| Total shares outstanding | 130 M | 100 % |
Result: Existing shareholders collectively go from owning 100 % of the company to owning ≈ 77 % of the post‑offering equity – a ≈ 23 % reduction in their ownership stake (i.e., a 23 % dilution).
General formula – Dilution % = NewShares ÷ (ExistingShares + NewShares)
Resulting ownership of existing shareholders = 1 – Dilution %
2. Dilution of Earnings‑Per‑Share (EPS)
EPS is calculated as:
[
\text{EPS} = \frac{\text{Net Income (or earnings)}}{\text{Shares Outstanding}}
]
If the company’s net income stays the same, the denominator (shares) grows from E to E + 30 M, so EPS falls proportionally.
Using the 100 M example:
| Shares | EPS impact | |
|---|---|---|
| Pre‑offering EPS | 100 M | EPS₀ |
| Post‑offering EPS | 130 M | EPS₀ × (100 M / 130 M) ≈ 0.77 × EPS₀ |
Thus, EPS would be reduced by roughly 23 % (the same percentage as the ownership dilution) if earnings are unchanged.
General formula – [
\text{EPS}{\text{new}} = \text{EPS}{\text{old}} \times \frac{\text{ExistingShares}}{\text{ExistingShares}+ \text{NewShares}
]
3. How to Apply the Calculation with the Exact Share Count
- Find the current shares outstanding – look at CCCS’s latest Form 10‑K/10‑Q, the “Common Stock – Shares Outstanding” line, or the “Capital Stock” footnote.
- Insert that number (E) into the formulas above.
- Resulting dilution – you’ll obtain the precise % ownership loss and EPS reduction.
Example with a different base (e.g., if the filing shows 115 M shares):
- Dilution % = 30 M / (115 M + 30 M) ≈ 20.7 %
- Existing shareholders’ ownership ≈ 79.3 % of the post‑offering company.
- EPS would fall by ≈ 20.7 % (EPSnew = EPSold × 0.793).
4. Why This Matters to Existing Shareholders
| Impact | Explanation |
|---|---|
| Ownership stake | A lower percentage means less voting power and a smaller claim on future cash flows (dividends, share repurchases, etc.). |
| EPS | A lower EPS can make the stock look less attractive on a valuation basis (e.g., P/E multiples) and may affect analyst forecasts. |
| Market perception | Dilution can put downward pressure on the share price, especially if the capital raised does not translate into proportionally higher earnings or growth. |
| Potential offset | If the proceeds from the $9.89‑per‑share offering are used to fund high‑return projects, the long‑term earnings base may expand, eventually neutralising or even reversing the EPS dilution. |
5. Bottom Line
- Rough estimate (assuming ~100 M existing shares): The issuance of 30 M new shares dilutes existing shareholders by ≈ 23 % and reduces EPS by the same ≈ 23 % (if earnings stay constant).
- Exact impact = 30 M ÷ (Current Shares + 30 M) for ownership dilution; EPSnew = EPSold × (Current Shares ÷ (Current Shares + 30 M)).
- Plug the actual current share count from the latest SEC filing into those formulas to obtain the precise percentages for CCC Intelligent Solutions Holdings Inc.
Takeaway: Until the proceeds are deployed into earnings‑generating initiatives, the mechanical effect of the secondary offering will be a roughly 20‑25 % reduction in both ownership percentages and EPS for existing shareholders, proportional to the size of the new issue relative to the pre‑offering share base.