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. Convertible Debenture

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

    A security giving stockholders entitlement to purchase new shares ...
  6. Anti-Dilution Provision

    A provision in an option or a convertible security. It protects ...
Related Articles
  1. Investing

    Why do share prices fall after a company has a secondary offering?

    The best way to answer this question is to provide a simple illustration of what happens when a company increases the number of shares issued, or shares outstanding, through a secondary offering. ...
  2. Options & Futures

    The "True" Cost Of Stock Options

    Perhaps the real cost of employee stock options is already accounted for in the expense of buyback programs.
  3. Options & Futures

    A New Approach To Equity Compensation

    The new financial accounting standard known as FAS 123R could take a bite out of your portfolio. Find out why here.
  4. Bonds & Fixed Income

    Convertible Bonds: An Introduction

    Find out about the nuts and bolts, pros and cons of investing in bonds.
  5. Bonds & Fixed Income

    Trademarks Of A Takeover Target

    These tips can lead you to little companies with big prospects.
  6. Options & Futures

    What is dilutive stock?

    Dilutive stock is any security that dilutes the ownership percentage of current shareholders - that is, any security that does not have some sort of embedded anti-dilution provision. The reason ...
  7. Fundamental Analysis

    What is the affect of the invisible hand on consumers?

    Discover how consumers help initiate and benefit from the invisible hand of the market, which naturally coordinates trade in an exchange economy.
  8. Economics

    How does the invisible hand phenomenon affect investment markets?

    Read about how the invisible hand of the market coordinates investment markets and provides social benefit and why its effects are distorted along the way.
  9. Fundamental Analysis

    What are some examples of economies of scale?

    Take a look at different examples of economies of scale, including how marginal costs can be reduced through external and internal factors.
  10. Fundamental Analysis

    How can quantitative easing be effective in the economy?

    Take a deeper look at the impacts of the Federal Reserve's large scale asset purchase plan, better known as quantitative easing, or QE.

You May Also Like

Hot Definitions
  1. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  2. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  3. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  4. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  5. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  6. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
Trading Center