They own a smaller portion of outstanding shares, but the shares they own are worth more. Their value doesn't decrease.

They're not worth more. The number of shares is increased by the amount that was issued. So that larger amount of equity is split among more shares.

A simple example:

Current equity of $100B, 100 shares outstanding. Each share is worth $1B, with 1% of voting power.

Then we issue $10B of equity via 10 shares.

Now we have equity of $110B, with 110 shares outstanding. Each share is still worth $1B, except each share now has 1/110 of voting power, instead of 1/100. Each share now only controls 0.91% of the company. Their ownership has been diluted.

edit: You can throw this comment thread URL into your favorite clanker (Claude, Gemini, whatever) and it will confirm exactly what I'm saying.

▲

quickthrowman 3 hours ago | parent | prev [-]

Issuing new shares is dilutive.

—

Stock buyback example:

There are 10 shares of ABC Corp, it has a market cap of $100. Each share is worth $10.

ABC corp buys back one share and destroys it, leaving 9 shares.

$100/9 shares=$11.11 per share.

—

Dilution example:

There are 10 shares of ABC Corp, it has a market cap of $100. Each share is worth $10.

ABC corp needs $10 so they sell one additional share which the board has authorized. There are now 11 shares.

$100/11 shares=$9.09 per share.

	▲	donkers 3 hours ago \| parent [-]
		Mechanically, from a corporate finance perspective, the price per share doesn't change. Equity decreases or increases by the amount of the buyback or issuance. So in your example, a buyback of 1 share means equity becomes $90, and each share is still worth $10. Likewise for dilution, equity goes up to $110, share still remains at $10. The dilution refers to the ownership of the company, not the stock price. However, in markets, a buyback is a positive signal (with increased EPS also) that can increase the share price.