On Wednesday, Harris & Harris (NASDAQ:TINY), the Motley Fool Rule Breakers recommendation and publicly traded venture capital firm specializing in nanotechnology and microsystems, announced its intention to float an additional 3 million shares of common stock.

There are two ways to look at this news.

The first scenario, or what I call the "sinking" scenario, is that the news is bad because it immediately dilutes the existing value of the company's 17 million shares. On the surface, this is how the market seemed to react -- slashing share prices by nearly 6%. However, if the market bought completely into this logic, it would have diluted the value of those shares by something closer to its actual dilution of 17 %.

Obviously, this didn't happen. Why not?

It's a good question and leads to the second, or what I call the "diving for pearls," scenario. TINY has always been difficult to value. The majority of its holdings have exciting long-term potential, but they are also quite risky. Its technology or products may not work, and the company is subject to intellectual property litigation, unfavorable economic conditions, and, of course, fierce competition.

That being said, the company -- using a net asset value methodology -- conservatively values its holdings at $4.61 per share. From this perspective, the stock would appear wildly overvalued at its current trading price of $12.30.

But as I argued back in May when TINY was trading at $11 a share, it looked like an increasingly attractive value because of its investments in a bevy of potential Rule Breaking start-ups such as Nanomix, Nantero, Cambrios, and Zia Laser. In the week following my article, the stock increased over 20% to $13 a share. Unfortunately, I had to watch in frustration from the sidelines in obedience to the Fool's ironclad disclosure policy, which prohibits authors from trading 10 days before or after writing about a stock.

The problem with the net asset value approach is that it does not -- and cannot -- value long-term valuation. This tricky job is left to the market and, to date, the market seems to like the growth prospects for TINY's portfolio of companies.

Under this "diving for pearls" scenario, the announcement of TINY's intention to raise an additional $30 to $40 million (depending on how it prices the shares) will allow the company's talented and experienced management team to expand their search for "tiny" pearls.

The more pessimistic take is that the company will simply have more money to throw at some of its existing ill-fated pearl-hunting expeditions, or launch new ones destined for a similar fate.

I myself subscribe to the former scenario, but this then leads to the follow-up question: Is TINY still a good investment at its current price?

The short-term answer is no.

I remain bullish on TINY's long-term potential, but with the dilution of existing shares and in the absence of any exciting news coming from its core holdings, I think TINY will continue to float slightly lower in the weeks ahead. Therefore, I would encourage would-be investors to sit tight and watch to see at what price the company itself offers its 3 million new shares.

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Fool contributor Jack Uldrich has been thinking small since grade school. He is the author of The Next Big Thing is Really Small: How Nanotechnology Will Change the Future of Your Business. Disclosure: He does not currently own shares in TINY. The Fool has an ironclad disclosure policy.