Narrow-Based Weighted Average

DEFINITION of 'Narrow-Based Weighted Average'

An anti-dilution provision used to ensure that investors are not penalized when companies are undergoing additional financing or issuing new shares. A narrow-based weighted average takes into account only the total number of outstanding preferred shares for determining the new weighted average price for the old shares.

BREAKING DOWN 'Narrow-Based Weighted Average'

The new weighted average price is adjusted for the preferred shareholder, thus providing protection against dilution. The narrow-based method is the most favorable for investors, as it lowers the price of the preferred shares more than other methods.

RELATED TERMS
  1. Preferred Stock

    A class of ownership in a corporation that has a higher claim ...
  2. Outstanding Shares

    A company's stock currently held by all its shareholders, including ...
  3. Broad-Based Weighted Average

    An anti-dilution provision used for the benefit of existing preferred ...
  4. Full Ratchet

    An anti-dilution provision that, for any shares of common stock ...
  5. Dilution

    A reduction in the ownership percentage of a share of stock caused ...
  6. Anti-Dilution Provision

    A provision in an option or a convertible security. It protects ...
Related Articles
  1. Active Trading Fundamentals

    Forces That Move Stock Prices

    You can't predict exactly how stocks will behave, but knowing what affects prices will put you ahead of the pack.
  2. Investing Basics

    Knowing Your Rights As A Shareholder

    We delve into common stock owners' privileges and how to be vigilant in monitoring a company.
  3. Investing

    Where to Ride Out the Volatility

    The one word that characterizes financial markets today: volatile. Take a look at these three considerations.
  4. Term

    The Advantages of Preferred Dividends

    Preferred dividends are cash distributions a company pays on its preferred shares.
  5. Mutual Funds & ETFs

    Preferred Stock ETFs Vs Bond ETFs

    If you’re weighing an investment in a preferred stock exchange-traded fund versus a bond ETF, there are two factors you should consider most.
  6. Investing Basics

    Explaining Wedding Warrants

    A wedding warrant is a warrant that can only be exercised if the host asset, usually a bond or preferred stock, is surrendered.
  7. Mutual Funds & ETFs

    PGX: PowerShares Preferred ETF

    Read an in-depth analysis of the PowerShares Preferred ETF, a preferred share-based ETF that focuses on generating investor income.
  8. Mutual Funds & ETFs

    3 ETFs that are Top Bets for Retirement in 2016 (SCHZ, VYM)

    Look at three ETFs that retirees or near-retirees should consider heading into 2016, and why it's important to consider both bond and equity funds.
  9. Investing

    Weighted Average Cost Of Capital (WACC)

    Weighted average cost of capital may be hard to calculate, but it's a solid way to measure investment quality
  10. Markets

    Are EM Stocks Finally Emerging?

    Many investors are looking at emerging market (EM) stocks and wonder if it’s time to step back in, while others wonder if we’ll see further declines.
RELATED FAQS
  1. What is the difference between preferred stock and common stock?

    Preferred and common stocks are different in two key aspects. First, preferred stockholders have a greater claim to a company's ... Read Full Answer >>
  2. What are ComputerShare's escheatment services?

    Escheatment is the process by which ownership of abandoned property is transferred to the state. Escheated property can include ... Read Full Answer >>
  3. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  4. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
  5. How many votes am I entitled to, if I own ordinary shares of a company?

    If an investor owns one ordinary share of a company, that investor is entitled to one vote on all of that company's major ... Read Full Answer >>
  6. What is the difference between the equity market and the stock market?

    The terms "equity market" and "stock market" are synonymous, both referring to the equity interests in publicly held companies, ... Read Full Answer >>
Hot Definitions
  1. Short Selling

    Short selling is the sale of a security that is not owned by the seller, or that the seller has borrowed. Short selling is ...
  2. Harry Potter Stock Index

    A collection of stocks from companies related to the "Harry Potter" series franchise. Created by StockPickr, this index seeks ...
  3. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  4. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  5. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  6. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
Trading Center