Antidilutive

AAA

DEFINITION of 'Antidilutive'

A term describing the effects of securities retirement, securities conversion or corporate actions (such as acquisitions made through the issuance of common stock or other securities) on earnings per common share (EPS), where EPS is increased for shareholders.

A transaction is considered to be antidilutive if its effect is to increase the amount of EPS, either by lowering the share count or increasing earnings.

A second use of the term refers to ownership rights, whereby existing shareholders in a certain class of shares have rights to purchase additional shares when there is a new issuance of securities that would otherwise reduce the ownership percentage of existing holders. This is called an anti-dilution provision.

INVESTOPEDIA EXPLAINS 'Antidilutive'

Although most commonly used in reference to convertible securities whose exercise would have the effect of increasing EPS, the use of the term "antidilutive" has become much more comprehensive.

For example, if Company A acquires Company B by using its common stock, but the earnings of Company B add more to EPS than the common stock issued, it is said to be an antidilutive acquisition.

RELATED TERMS
  1. Earnings Per Share - EPS

    The portion of a company's profit allocated to each outstanding ...
  2. If-Converted Method

    A method used to calculate the share impact of convertible securities ...
  3. "A" Round Financing

    The first major round of business financing by private equity ...
  4. Anti-Dilution Provision

    A provision in an option or a convertible security. It protects ...
  5. Convertible Debenture

    A type of loan issued by a company that can be converted into ...
  6. Rights

    A security giving stockholders entitlement to purchase new shares ...
Related Articles
  1. Why do share prices fall after a company ...
    Investing

    Why do share prices fall after a company ...

  2. The
    Options & Futures

    The "True" Cost Of Stock Options

  3. A New Approach To Equity Compensation ...
    Options & Futures

    A New Approach To Equity Compensation ...

  4. Convertible Bonds: An Introduction
    Bonds & Fixed Income

    Convertible Bonds: An Introduction

comments powered by Disqus
Hot Definitions
  1. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  3. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  4. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  5. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  6. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
Trading Center