Broad-Based Weighted Average
Broad-Based Weighted Average is an anti-dilution method in which a preferred shareholder’s conversion price (the price by which preferred shares are converted to common shares) is adjusted in a subsequent financing round to a lower price per share. The new conversion price is calculated by multiplying the conversion price by a weighted average rate of the previously issued stock and the new preferred shares. The broad-based formula, as opposed to narrow-based weighted average, includes in the calculation all outstanding common stock on a fully-diluted basis, including convertible securities, warrants, and options.
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