The type(s) of dilution that is most relevant to a firm's shareholders when the firm's shares are issued with rights is(are) the dilution of stock price per share.
What is dilution of stock price per share?
Share dilution occurs when a firm issues more shares, lowering the percentage of ownership held by an existing shareholder. Shares may be diluted by holders of optionable securities converting their holdings, by secondary offerings to obtain extra funds, or by the issuance of new shares in exchange for purchases or services.
What does dilution do to share price?
Dilution typically coincides with a drop in stock price. The likelihood that the stock price would decline increases with the amount of dilution. Even if a company's market capitalization—the sum of the value of its outstanding shares—increases, dilution might cause stock prices to remain lower.
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