Och-Ziff Shares Plunged: What You Need to Know

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of publicly held hedge-fund manager Och-Ziff Capital (NYS: OZM) were taking a dive today, losing as much as 10% in intraday trading after the company announced a sale of new stock.

So what: Bottom line: Investors don't like it when a company sells new shares. The reason is simple -- when that happens, each previous investor ends up owning a smaller piece of the company and therefore gets a smaller chunk of the profits.

In a press release yesterday, Och-Ziff announced that it will sell $250 million in new shares, in large part to help pay down some of its current debt. The share sale shouldn't have come as too much of a surprise to investors, as the company had previously filed a shelf registration to sell shares.

Now what: While share dilution is rarely something to cheer, if a company sells shares and uses the new capital wisely, it can end up benefiting shareholders over the long term. As a hedge fund, the hope would be that the folks at Och-Ziff are savvy capital allocators, so the news may not be quite as awful as the stock's dive suggests.

Want to keep up to date on Och-Ziff Capital?Add it to your watchlist.

At the time this article was published Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.Fool contributorMatt Koppenhefferhas nofinancial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting hisCAPS portfolio, or you can follow Matt on Twitter,@KoppTheFool, or onFacebook. The Fool'sdisclosure policyprefers dividends over a sharp stick in the eye.

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