Intermediate, 7 min read. Checked with Scalpel 1.12.8 on .
In short
Dilution is a company selling new shares, which puts a seller on every spike you buy into. Scalpel reads each company's SEC filings and finances into one verdict, shown as a chip on the scan row and the desk: a red Selling 21h means a financing filing in the last 7 days, a red Warrants near means warrants or convertible notes can be cashed in near the price, an amber Dilution is high risk, and a grey Can dilute means it is set up to sell. Hover the chip for the reasons and the filings.
A small cap with fresh news and a tight float can run hard. If the same company has just registered stock to sell, the run often stalls exactly where the company or its new shareholders start selling. Checking for that by hand means reading EDGAR filing lists, prospectus supplements and balance sheets in the minute before you trade. Scalpel does it for every stock it watches, from SEC EDGAR directly, with no paid dilution service involved.
Before you start
Intel on, with the SEC contact email set (guide 9.1). Without it, there is no dilution read at all.
Optional: an OpenAI key, for warrant and offering prices and for reading 8-Ks whose items leave it open.
The filings that mean dilution
Scalpel classifies every filing for the stocks it watches. These are the ones that sell, or set up to sell, stock:
Form
What Scalpel calls it
What it means for a long
S-1, F-1
Registering stock to sell
A new offering or a resale is being registered
S-1/A
Offering paperwork updated, pricing may be close
An amended registration: often days before an offering prices
S-3, F-3
Shelf: can sell stock later
A shelf: permission to sell stock any time over the next three years
EFFECT
Sale paperwork approved: can sell now
The SEC declared a registration effective
424B4, 424B1
Offering priced
The final terms of an offering
424B5
Selling stock off its shelf
A sale off the shelf, including an ATM offering that sells into the market
424B3, 424B7
Holders cleared to sell shares
Existing holders can now resell their shares
8-K with item 3.02
Sold shares privately
An unregistered sale of stock, such as a private placement
Some filings look like dilution and are not, so Scalpel leaves them out: a 424B2 is debt paperwork, and an S-3ASR is an automatic shelf only large, seasoned companies can file. An 8-K that reports a signed agreement (item 1.01) or other news (8.01) can hide a financing; with an OpenAI key, Scalpel reads the filing and relabels it, for example Selling stock: registered direct or Warrant deal: new shares coming.
From the company's reported financials, Scalpel also works out its cash runway (cash divided by its quarterly cash burn, in months) and how much its share count grew over about a year.
The verdict
All of that becomes one verdict, with the reasons strongest first:
Verdict
When
Chip
Severe
A financing filing in the last 7 days, or a warrant or conversion price at, below or within 10% above the current price
Red Selling 21h (with the filing's age), or red Warrants near
High
A financing filing 8 to 30 days ago; or a shelf plus under 6 months of cash; or a shelf plus two or more 424B prospectuses in 12 months
Amber Dilution
Medium
A shelf on file; or under 12 months of cash; or the share count up more than 50% in a year; or a 424B in the last 12 months
Grey Can dilute
Low
None of the above
No chip
Any financing filing in the last 7 days reads as selling now, including a brand-new shelf. A shelf is permission, not a sale, but a company that just filed one usually means to use it.
Check a stock before you buy
Look for a dilution chip. It is the first chip in a scan row's INTEL column, and it shows in the intel strip under a desk's header. No chip means Low.
Hover it. The card leads with what it means for a long trade, then the reasons, the prices where new sellers sit, and the recent financing filings with their age and form.
Dilution: selling nowThe company is selling stock right now. Expect a seller on every spike; breakouts tend to fail.21h ago: Selling stock off its shelf (424B5)Can sell stock any time (has a shelf)Share count up 64% in a yearLast offering at 2.60 (2.0M shares): those buyers may sell thereWarrants at 3.75 (2.0M shares): holders may sell there21h ago Selling stock off its shelf (424B5)140d ago Shelf: can sell stock later (S-3)
EFGH's red Selling 21h chip, hovered: a 424B5 off a shelf 21 hours ago, the shelf behind it, a 64% jump in share count, the last offering's price and the warrants, then the filings themselves. Demo data.
Read the prices against the chart. "Last offering at 2.60 (2.0M shares)" means 2 million shares were just sold at $2.60. Those buyers may sell into a run above it. "Warrants at 3.75" means holders can buy new shares at $3.75 and sell them, so a push toward $3.75 meets supply. With an OpenAI key these prices are drawn on the chart (guide 9.6).
Check the desk strip when the stock is loaded. It carries the same chip with the filing in plain words.
D2TRADEREFGHRTHHide
Deal 2hEfgh Signs $40 Million Supply Agreement
Selling 21hSelling stock off its shelf (424B5)
Desk D2's intel strip on EFGH: the Deal catalyst with its headline, then Selling 21h with the filing it refers to. Demo data.
Decide with the rest of the picture. A strong catalyst on a company that is selling stock is a common trap: the news brings buyers, and the company sells to them. A common approach is to pass on a red chip, or to trade it smaller and take profits faster into spikes. That is your call; the chip only makes sure you know.
How fast Scalpel sees a filing
SEC EDGAR's live filings feed is checked every 5 seconds on weekdays from 06:00 to 22:00 ET, and every 2 minutes outside those hours.
For stocks you hold and stocks on your desks, Scalpel also re-reads the company's full filing list every 60 seconds during those hours.
A news flash announcing a new filing (Dow Jones posts one for each 8-K) makes Scalpel re-read that company at once.
EDGAR itself posts filings within seconds to a few minutes during the day. An offering priced in the evening usually reaches you first as a press release headline (graded as offering news, guide 9.4), with the 424B prospectus the next morning.
When a financing filing lands on a stock you hold, you get a red toast and a spoken exit warning, in SIM and LIVE. On a stock you are only watching, an amber toast. For the first press of a buy key soon after, see the dilution entry guard (guide 9.7).
What can go wrong
No dilution chip on any stock. The SEC contact email is missing, or SEC filings are not live yet. Check the status lines in Settings > Intel (guide 9.1).
A stock you know is diluting shows no chip. It may be past the 40 symbols intel follows, or the company is not in SEC EDGAR's ticker list (some foreign issuers and very new listings). Load it onto a desk to put it ahead of the scanner list.
The share count looks too low after an offering. SHS OUT comes from the last reported financials and lags a fresh sale. Trust the Selling chip over the count.
Questions
What is an S-3 shelf registration?
Permission from the SEC to sell stock at any time over about three years, in pieces, without filing a new registration each time. Scalpel reads an S-3 or F-3 filed in the last three years as a company that can dilute.
What is a 424B5?
A prospectus supplement for a sale off a shelf: a takedown or an at-the-market program. Scalpel labels it Selling stock off its shelf and reads it as selling now for 7 days.
What is an ATM offering?
An at-the-market program: the company sells new shares straight into the market over time, often into strength. It is filed as a 424B5 with a sales agreement, and it puts a quiet seller behind every spike.
How quickly does Scalpel pick up a new filing?
EDGAR's live feed is checked every 5 seconds on weekdays from 06:00 to 22:00 ET. Held and desk symbols also get their filing list re-read every minute.
Why does the chip say Selling when the company only filed a shelf?
Any financing filing in the last 7 days reads as selling now, a new shelf included. Hover the chip: the card names the form, so you can see whether it was a shelf or a sale.
Does a Low verdict mean the stock will not dilute?
No. It means none of the warning signs are in the filings read so far. Offerings can be announced at any time, often by press release first.