Fully Diluted Shares

What is Fully Diluted Shares?

Fully diluted shares count all shares that would exist if every convertible security converted to common stock. This includes outstanding shares plus options (granted and ungranted), warrants, convertible notes, and SAFEs.

Fully diluted ownership shows your true ownership percentage. If you own 1M of 8M outstanding shares (12.5%), but fully diluted is 10M, you actually own 10%.

Why Fully Diluted Matters

Investors always think in fully diluted terms. Your ownership stake is based on fully diluted shares, not just what's currently outstanding. Ignoring dilution overstates your ownership.

Option pools count as dilution even before they're granted because they're reserved for future issuance and reduce everyone else's percentage.

Calculating Fully Diluted

Add all outstanding common and preferred shares. Add all granted options and warrants. Add the entire option pool (including unallocated). Add shares from convertible securities at their conversion terms. This is your fully diluted share count.

Cap table calculation:

• Common shares outstanding: 6,000,000
• Preferred shares: 2,000,000
• Option pool (granted): 1,500,000
• Option pool (unallocated): 500,000

Fully Diluted = 6M + 2M + 1.5M + 0.5M = 10,000,000

If you own 1M shares, you own 10% fully diluted (not 16.7% of outstanding).