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.

  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. Anti-Dilution Provision

    A provision in an option or a convertible security. It protects ...
  5. Full Ratchet

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

    A reduction in the ownership percentage of a share of stock caused ...
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  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 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 >>
  3. 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 >>
  4. 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 >>
  5. 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 >>
  6. How much, if any, influence do non-controlling interest shareholders have?

    Non-controlling interest shareholders do not typically have much influence. The level of influence can vary, however, depending ... Read Full Answer >>

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