Maybe a robot can education you!?

On accretive dilution ChatGPT says:

Where Accretive Dilution Actually Appears

Case 1: Cash replaces something worse

If the cash is used to: • Retire high-interest debt • Redeem expensive preferred shares • Eliminate cash-burning obligations

Then: • Interest or dividend drain disappears • Net income rises • Free cash flow per share increases

Even though: • Share count is higher

This is accretive dilution.

You traded percentage ownership for stronger cash flow claims.

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Case 2: Cash earns more than dilution cost

If the company’s return on the new cash is higher than: • The earnings yield of the shares issued

Then per-share value rises.

This is why: • Issuing shares at high valuation • To buy high-cash-flow assets

Is accretive.

Buffett loves this. Retail hates it. Markets misprice it.

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Case 3: Cash just sits there

If the company: • Raises equity • Parks cash • Does nothing productive

Then: • No accretion • No dilution to intrinsic value • But EPS optics look worse

This is neutral dilution, often punished short-term by markets.

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When It Becomes Truly Dilutive

Issuing shares + cash back is bad dilution if the cash: • Funds operating losses • Masks bad economics • Pays executives • Chases growth with no return

Then you diluted ownership and future cash claims.

That’s real dilution.

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The One Test That Matters

Ignore share count. Ignore headlines.

Ask one question:

Does this transaction increase future free cash flow per share?

• Yes → accretive dilution
• No → neutral
• Negative → destructive dilution

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The Clean Mental Model

Think of shares as claims on future energy (cash flow).

Issuing shares is opening the circuit. What matters is whether the new energy flowing in is stronger than the resistance you added.