Avoiding Serial Diluters in Microcaps

Fast screens to exclude serial diluters

• Share count CAGR > 20 percent over 4-8 quarters.
• Frequent S-1/424B filings, ATM updates, or equity line agreements.
• Convertibles with floorless or reset features.
• Warrants issued below market with anti-dilution protections.

Filing tells to read closely

• Subsequent events: new raises signed after quarter end.
• Use of proceeds that just fund working capital burn.
• Covenant breaches leading to equity cures.
• Compensation heavy in cheap options or RSUs.

Portfolio rules

• Cap position size when average daily dollar volume is thin.
• Demand stronger balance sheets (cash/liabilities > 1.0x) if dilution history exists.
• Pair dilution screen with NCAV/NTAV discounts to avoid paying for shrinking pies.
• Exit if share issuance exceeds your modeled budget without clear ROI.

Internal links and tools

• Balance-sheet events: Shares outstanding changes
• Volume tell: Interesting volume events
• Price pressure: Near-lows scanner
• Sentiment: Short interest changes
• More reading: Resources hub

Compliance note

This guide is educational and not investment advice. Do your own research or consult a professional adviser.