# Check a stock for dilution before you buy

> Spot a company about to sell stock into your move: S-1, S-3 shelves, 424B prospectuses, ATMs, warrants and cash runway, read into one dilution verdict.

Source: https://scalpeltrade.com/guides/check-dilution
Guide 9.2, Intel: borrow, dilution and catalysts. Intermediate, 7 min read.
Checked with Scalpel 1.12.8 on 2026-10-15. By Scalpel Team.

**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](https://scalpeltrade.com/guides/set-up-intel)). 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](https://scalpeltrade.com/guides/glossary#shelf-registration): 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](https://scalpeltrade.com/guides/glossary#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.

**Note.**

Low is not a guarantee. It means none of the warning signs are in the filings Scalpel has read. A company can announce an offering at any moment, and an evening deal often reaches you as a headline before its filing does.

## Check a stock before you buy

1. **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.
2. **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.

*Screenshot: 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.*

3. **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](https://scalpeltrade.com/guides/warrant-and-offering-lines)).
4. **Check the desk strip when the stock is loaded.** It carries the same chip with the filing in plain words.

*Screenshot: Desk D2's intel strip on EFGH: the Deal catalyst with its headline, then Selling 21h with the filing it refers to. Demo data.*

5. **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](https://scalpeltrade.com/guides/catalyst-grading)), 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)](https://scalpeltrade.com/guides/dilution-entry-guard).

## 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](https://scalpeltrade.com/guides/set-up-intel)).
- **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.