A downside to issuing shares to new investors is

One downside to issuing shares to new investors is:

Dilution of Ownership: When a company issues new shares, the existing shareholders' ownership percentage is diluted. This means that the value of each share decreases, as the total number of outstanding shares increases. This can be a concern for existing shareholders who may feel that their ownership stake in the company is being reduced.

For example, let's say a company has 1 million shares outstanding and is valued at $10 million. Each share is worth $10. If the company issues 100,000 new shares to raise capital, the total number of outstanding shares increases to 1.1 million. The value of the company remains the same, but the value of each share decreases to $9.09 ($10 million / 1.1 million shares). Existing shareholders who own 10% of the company (100,000 shares) now own only 9.09% of the company (90,900 shares).