Broad-Based Weighted Average

A valuation technique for newly issued securities intended to protect existing, preferred equity shareholders from experiencing dilution of their ownership stake.

Tom was the largest shareholder of both common and preferred equity in the company he founded, MyFace.com. When the time came for a secondary offering to raise funds, Tom’s investment bankers made sure to employ a broad-based weighted average to price the new shares...at the exact amount that would minimize how much value his preferred stock would lose on the day of the deal.