TZUP

How will the proposed public offering affect the dilution of existing shares and EPS for TZUP?

Created August 09, 2025 at 12:02 AM

Short answer:

The press release does not contain the quantitative details (number of new shares, the offering price, the total amount of capital to be raised, or the current share‑count and earnings figures) that are needed to calculate exactly how much dilution the offering will create or how it will change Thumzup’s earnings‑per‑share (EPS).

Because those numbers are missing, we can only describe the mechanics of what will happen to dilution and EPS, and outline how you would compute the exact impact once the missing data become public (e.g., in the S‑1/8‑K filing).

Below is a thorough walk‑through that covers:

What a “best‑efforts” public offering is
How a new equity raise normally affects dilution and EPS
The specific information we’re missing for a precise calculation
The formulae you would use once the missing data are disclosed
Potential range of outcomes for TZUP (qualitative scenarios)
What to watch for after the announcement (next filings, market reaction, etc.)

1. What the “best‑efforts” Offering Means for Dilution

Feature	Explanation
Best‑efforts Offering	The underwriters agree to use their best effort to sell the securities but are not obligated to purchase any unsold shares. This is typically used for smaller or more speculative issuances, and the size of the actual raise may end up lower than the “maximum” size disclosed in the press release.
Series D Shares	The company is creating a new “Series D” class of common stock. Because the shares are “newly designated,” they will increase the total outstanding share count when they are actually issued and sold.
Impact on Existing Shareholders	The issuance of new shares dilutes the ownership percentage of current shareholders and, all else equal, dilutes EPS (because the same net income will be spread over more shares).
Proceeds Use	The company says the proceeds will be used “to accelerate growth, fund product development, and for working capital.” If those investments generate additional earnings, the EPS impact could be neutralized or even positive over time, but the immediate effect is dilution.

2. How a New Equity Issue Normally Affects Dilution and EPS

2.1 Dilution of Ownership

Pre‑offering share count (S₀) = number of shares outstanding today (including any shares already issued as Series A‑C, convertible securities, etc.).
New shares to be sold (N) = the number of Series D shares the company ultimately sells.
Post‑offering share count (S₁) = S₀ + N (assuming no other share changes at the same time).

The ownership dilution for existing shareholders = N / S₁.

If the company sells 10 % of the post‑offering shares, each existing shareholder’s percentage ownership falls by roughly 9.1 % (because they now own a smaller piece of a larger pie).

2.2 EPS Dilution

Earnings per Share (EPS) is:

[
\text{EPS} = \frac{\text{Net Income}}{\text{Weighted‑Average Shares Outstanding}
}
]

Assuming net income (NI) stays constant in the short term, the EPS after the offering (EPS₁) can be estimated as:

[
\text{EPS}1 = \frac{\text{NI}}{S0 + N}
]

Dilution factor = (\frac{S0}{S0 + N}).

If the company raises, for example, 5 % new shares, EPS would fall roughly 5 % (again assuming NI does not change).

If the proceeds generate additional earnings (ΔNI) – e.g., new revenue streams, cost efficiencies – the net effect on EPS becomes:

[
\text{New EPS} = \frac{\text{NI} + \Delta \text{NI}}{S_0 + N}
]

The break‑even increase in net income required to keep EPS unchanged is:

[
\Delta \text{NI}{\text{breakeven}} = \text{NI} \times \left(\frac{N}{S0}\right)
]

If the company can generate at least that much incremental profit, EPS will not be diluted despite the larger share count.

3. What the Press Release does not tell us (the missing pieces)

Missing Information	Why it matters for dilution/EPS
Exact number of Series D shares to be offered	Determines the denominator (new share count).
Offering price (per share) and total proceeds	Determines how much capital is raised; can be used to gauge whether the capital will be sufficient to generate additional earnings.
Current weighted‑average shares outstanding (including convertible securities, options, warrants)	Needed to compute the exact dilution factor.
Projected use of proceeds and expected ROI (e.g., expected incremental earnings or cash flow)	Enables a projected impact on net income, which together with the new share count gives a forward‑looking EPS estimate.
Projected timeline (when the shares will actually be issued)	Determines whether the dilution is immediate or will be phased.
Management’s guidance on expected EPS impact (if any)	Companies sometimes disclose a “no‑dilution” or “minimal impact” expectation; absent that, analysts must compute it.

Because the release does not contain these data, any numerical estimate would be pure speculation. The only responsible statement is that dilution will occur unless the proceeds are used to generate enough incremental earnings to offset the added share count.

4. How to Compute the Impact Once the Missing Data are Available

Below is a simple Excel‑style template you can fill in once the S‑1/8‑K is filed:

Input	Explanation	Formula
`NI₀`	Current Net Income (most recent fiscal year)	–
`S₀`	Current weighted‑average shares outstanding (including all convertible securities, options, etc.)	–
`N`	Number of newly issued Series D shares sold	–
`P`	Offering price per share	–
`proceeds = N × P`	Total capital raised	–
`ΔNI`	Estimated incremental net income from using the proceeds (e.g., ROI × proceeds)	–
Post‑offering shares `S₁ = S₀ + N`	–
Post‑offering EPS (no extra earnings) `EPS₁ = NI₀ / S₁`	–
Adjusted EPS (if ΔNI is added) `EPS_adj = (NI₀ + ΔNI) / S₁`	–
Dilution % = `N / (S₀ + N)`	–
EPS change = `((EPS₁ - EPS₀)/EPS₀) * 100%`	–

You can plug these values into a simple spreadsheet or a calculator.

Example (purely illustrative):

S₀ = 10  million shares
NI₀ = $5  million → EPS₀ = $0.50
N = 1  million new shares (10% increase)

If no extra earnings:

S₁ = 11  million → EPS₁ = $5 M / 11 M = $0.4545 → ~9.1% EPS reduction.

If proceeds $10 M at 10% ROI generate $1 M extra net income:

ΔNI = $1 M → New NI = $6 M → EPS = $6 M / 11 M = $0.545 → ~9% EPS increase despite dilution.

The exact numbers will vary; you’ll need the real figures to fill in the template.

5. Qualitative Range of Possible Outcomes for TZUP

Scenario	Likelihood (subjective)	Reasoning
Small‑scale offering (e.g., 5 % of current shares)	Moderate‑high	“Best‑efforts” suggests they may not reach a large target; the dilution will be modest.
Large‑scale offering (≥15 % new shares)	Low‑moderate	If the company is aggressively capital‑raising to fund a major product roll‑out, the size could be larger.
Positive ROI on proceeds (e.g., new ad‑tech platform that quickly lifts revenue)	Uncertain – depends on product pipeline. The press release describes the company as a “digital asset accumulator and advertising industry disruptor,” implying they expect a sizable market opportunity.
Negative/neutral ROI	Possible if the market does not adopt the new product or if execution fails; EPS would then fall.
Market Reaction	Historically, new‑issue announcements cause a short‑term dip in share price (due to dilution concerns). If investors believe the capital will be deployed efficiently, the price may bounce or even rise.

Key Take‑away:

- Immediate effect: Dilution of ownership (the percentage of the company held by current shareholders will fall) and downward pressure on EPS (unless the capital raised generates at least enough new earnings to offset the new shares).

- Long‑term effect: Depends entirely on how efficiently Thumzup invests the proceeds and whether they can grow earnings at a pace that outpaces the dilution.

6. What to Watch After the Announcement

SEC filing (Form S‑1, S‑8, or 8‑K). It will reveal:
- Exact number of shares to be issued (maximum & minimum)
- Offering price range and any underwriter discounts
- Exact proceeds estimate and use‑of‑proceeds breakdown
- Full current share count (including convertible securities).
Management’s forward‑looking statements. They often include an “expected impact on diluted EPS” or a “non‑dilution” covenant if the proceeds are used to fund earnings‑accretive projects.
Analyst commentary – after the filing, analysts will model the dilution and EPS impact. Watch for “dilution per share” calculations in research notes.
Stock price movement – watch the market for immediate price reactions; a sharp decline can indicate that investors believe the offering is large or that the market doubts the company’s ability to use the money profitably.
Future quarterly earnings – the first earnings release after the capital is deployed (typically 6–12 months later) will reveal whether the incremental net income offset the dilution, which will be reflected in the actual EPS versus the pro forma EPS that analysts may have projected.

7. Bottom‑Line Summary

Dilution will occur because new Series D shares will be added to the capital structure.
EPS will be diluted unless the cash raised generates enough incremental earnings to offset the larger share count.
Quantitative impact cannot be calculated from the current press release; you need the exact number of shares, the offering price, and the current share count (and any convertible securities).
Once the S‑1/8‑K is filed, you can plug the numbers into the simple formulas provided above to get precise dilution and EPS effects.

Until those details appear, the best you can say is that the offering introduces a dilution risk that will be offset only if the capital is used to generate sufficient additional earnings. Keep an eye on the forthcoming SEC filing for the precise numbers and on analysts’ models for the expected EPS impact.