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If you pour a bunch of cream into black coffee, you dilute the coffee—it's tastier, yes, but it's not just coffee anymore.
Same deal with stocks. The more shares a company has outstanding, the more the company is owned by other people and the more diluted it is—which means that each person with stock owns a tinier chunk of the pie.
If a company has 50 million shares outstanding and grants 10 million options with a low strike price, it has diluted itself about 20% because the options will be exercised and—presto!—the company now has 60 million shares outstanding. Early stage start-up companies usually have stock option plans so most "suffer" dilution because they're trying to raise cash for growing the company.