# Dilution `kaal:entity:dilution` **Status.** derived This node is assembled mechanically from the 10 claims that carry the concept tag `dilution`. It is a roster of what the corpus says under this term. It is **not** an adjudicated definition: no single statement here has been ruled canonical, and no first-appearance call has been made. Read the claims and judge for yourself. ## Every claim under this term 10 claims across 8 works, 2011 to 2021. **2011** - [1908473-009](https://wulfkaal.github.io/claims/1908473-009) [design/asserted] -- The volume of contingent capital issuance should be large enough that conversion produces sufficient dilution, and the trigger timeframe should be roughly ninety days. > The volume of CCS issuance should probably be large enough to result in sufficient dilution upon conversion,47 and the timeframe for the trigger should probably be around ninety days. Wulf A. Kaal, Christoph Henkel, Contingent Capital with Sequential Triggers (2011). SSRN: https://ssrn.com/abstract=1908473 - [1908473-018](https://wulfkaal.github.io/claims/1908473-018) [mechanism/argued] -- The threat of loss on conversion and the implicit dilution of existing stock holdings reduce shareholders' incentive to press management for higher risk in pursuit of higher returns. > The threat of loss due to conversion of CCS and the implicit dilution of stock holdings could reduce incentives for shareholders to encourage management to take higher risks for higher returns. Wulf A. Kaal, Christoph Henkel, Contingent Capital with Sequential Triggers (2011). SSRN: https://ssrn.com/abstract=1908473 **2012** - [1998455-010](https://wulfkaal.github.io/claims/1998455-010) [mechanism/argued] -- The threat of dilution of stock holdings, combined with the threat of loss on conversion, reduces the pressure shareholders place on the management of systemically important financial institutions to take higher risks. > The threat of dilution of stock holdings in combination with a threat of loss due to conversion could help reduce shareholder pressure on SIFI management to take higher risks. Wulf A. Kaal, Initial Reflections on the Possible Application of Contingent Capital in Corporate Governance (2012). SSRN: https://ssrn.com/abstract=1998455 - [2061166-022](https://wulfkaal.github.io/claims/2061166-022) [mechanism/argued] -- Because conversion carries a threat of loss and implicit dilution of stock holdings, contingent capital reduces shareholders' incentive to push management toward higher risk in pursuit of higher returns. > Moreover, given the threat of loss due to conversion and the implicit dilution of stock holdings, contingent capital has the potential to reduce incentives for shareholders to encourage management to take higher risks for higher returns. Christoph K. Henkel, Wulf A. Kaal, Contingent Capital in European Union Bank Restructuring (2012). SSRN: https://ssrn.com/abstract=2061166 - [2097160-037](https://wulfkaal.github.io/claims/2097160-037) [mechanism/argued] -- Contrary to Gordon's view that contingent convertible bonds do not address the Fuld Problem, if executive packages do not include a large equity portion, managers have no incentive to block an equity infusion in order to preserve the value of their own equity. > If executives' compensation packages do not include a large equity portion, managers have no incentive to avoid an equity infusion to preserve the value of their own equity.257 Wulf A. Kaal, Contingent Capital in Executive Compensation (2012). SSRN: https://ssrn.com/abstract=2097160 **2017** - [3067615-023](https://wulfkaal.github.io/claims/3067615-023) [failure/argued] *(failure mode)* -- Because the token supply is controlled by ICO promoters who must reserve tokens for future funding needs, token holders can be diluted by later issuance of reserve tokens and their token value can be diminished without any ability to protect themselves against such events. > Because the token supply is controlled by the ICO promoters, the token holders may be diluted in the future if the platform decides to issue more reserve tokens to additional investors. Wulf A. Kaal, Marco Dell'Erba, Initial Coin Offerings Emerging Practices, Risk Factors, and Red Flags (2017). SSRN: https://ssrn.com/abstract=3067615 - [3067615-024](https://wulfkaal.github.io/claims/3067615-024) [failure/argued] *(failure mode)* -- Hardcoded lockup periods can protect token holders against supply side induced devaluation, but they also decrease the token economic flexibility the promoter team needs to raise additional funds, so the remedy trades investor protection against issuer financing capacity. > However, while such lockup periods may protect token holders against dilution, it also decreases much needed token economic flexibility for the promoter team to raise additional funds when needed. Wulf A. Kaal, Marco Dell'Erba, Initial Coin Offerings Emerging Practices, Risk Factors, and Red Flags (2017). SSRN: https://ssrn.com/abstract=3067615 - [3071378-035](https://wulfkaal.github.io/claims/3071378-035) [mechanism/argued] -- Because the total supply of DAO tokens is pre-determined in code, dilution by central administrators such as government officials or self-interested or biased executives is impossible. > because the total supply of tokens is pre-determined in the DAO code, dilution by central administrators such as government officials or self- interested or biased executives/supervisors/CEOs is impossible, which further illustrates the power of blockchain structures such as the DAO. Wulf A. Kaal, Blockchain Technology and Race in Corporate America (2017). SSRN: https://ssrn.com/abstract=3071378 **2018** - [3117224-010](https://wulfkaal.github.io/claims/3117224-010) [failure/argued] *(failure mode)* -- ICO investors have no preemptive rights or other anti-dilution protections, so they may be diluted if promoters later issue more reserve tokens to additional investors. > ICO investors have no preemptive rights or other anti- dilution protections. If the promoters decide to issue more reserve tokens to additional investors, the ICO investors may be diluted in the future. Wulf A. Kaal, Initial Coin Offerings The Top 25 Jurisdictions and Their Comparative Regulatory Responses (2018). SSRN: https://ssrn.com/abstract=3117224 **2021** - [3782216-015](https://wulfkaal.github.io/claims/3782216-015) [mechanism/argued] -- Because underwriting mints new reputation tokens, passive holders see their proportional ownership in the DAO fall over time, which is designed to incentivize agents to underwrite actively while still allowing passive investors to earn income. > Thus, the total number of tokens grows over time. This implies that "passive" agents who hold the tokens purely to receive a share of future premia will find their proportional ownership in the DAO decrease over time. Craig Calcaterra, Wulf A. Kaal, Decentralized Finance (DeFi) (2021). SSRN: https://ssrn.com/abstract=3782216 ## Verify Every claim above resolves to a record carrying a verbatim source quote, the sha256 of the source PDF, and a preformatted citation. Nothing here asks to be taken on trust. curl -s https://wulfkaal.github.io/entities/dilution.md | sha256sum **Canonical form.** This markdown file is the canonical hashed representation of this entity node. Its sha256 is the content hash.