Narrow-Based Weighted Average

AAA

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.

INVESTOPEDIA EXPLAINS '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. Outstanding Shares

    A company's stock currently held by all its shareholders, including ...
  2. Preferred Stock

    A class of ownership in a corporation that has a higher claim ...
  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. Dilution

    A reduction in the ownership percentage of a share of stock caused ...
  6. Full Ratchet

    An anti-dilution provision that, for any shares of common stock ...
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. Is a company's paid in capital affected by the trading of its shares in the secondary ...

    The amount of paid-in capital a company has is not affected by the trading of its shares on the secondary market. Paid-in ... Read Full Answer >>
  3. Why is the value of capital stock important to public shareholders?

    The value of a company's capital stock is important to public shareholders, because a company's capital stock represents ... Read Full Answer >>
  4. How do changes in capital stock illustrate the overall health of a company?

    Changes in capital stock normally illustrate that the overall health of a company is strong, and that it is seeking to raise ... Read Full Answer >>
  5. What is the difference between Class A shares and other common shares of company's ...

    The difference between Class A shares and other common shares of a company’s stock is usually the amount of voting rights ... Read Full Answer >>
  6. Does the profit or loss of a company affect its paid in capital?

    The profits or losses of a company do not affect its paid-in capital. Paid-in capital is generated solely by the sale of ... Read Full Answer >>
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 Basics

    Explaining Net Tangible Assets

    Net tangible assets is a company’s total assets subtracting both intangible assets (such as goodwill and intellectual property) and total liabilities.
  4. Economics

    What Does Liquidation Mean?

    Creditors liquidate assets to try and get as much of the money owed to them as possible.
  5. Stock Analysis

    Google Stock: A Tale of Two Share Classes

    Google stock comes in two different flavors with different rights for shareholders.
  6. Investing

    7 Investing Mistakes Warren Buffett Regrets

    Even the “Oracle of Omaha” has made a few money mistakes investing, from losing billions by passing on stock options to companies destined to fail.
  7. Mutual Funds & ETFs

    Top 4 High-Yielding Preferred Stock ETFs

    ETFs offer diversification, a clear advantage. Preferred stock ETFs offer even more.
  8. Investing Basics

    What are Ordinary Shares?

    Ordinary shares are any type of shares that are not preferred and don’t pay any type of predetermined dividend amount.
  9. Investing Basics

    What is Capital Stock?

    Capital stock refers to the number of authorized shares a corporation may issue, both common and preferred.
  10. Mutual Funds & ETFs

    Pros and Cons: Preferred Stock ETFs vs. Bond ETFs

    A look at the differences between preferred stock ETFs and bond ETFs and when you should invest in one over the other.

You May Also Like

Hot Definitions
  1. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  2. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  3. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  4. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  5. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  6. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!