Narrow-Based Weighted Average
The Narrow-Based Weighted Average is an anti-dilution protection for equity holders. If equity is sold at a lower price than the price an investor paid previously, the price the investor previously paid is discounted. The price the investor originally paid and the new lower price are put into a weighted average formula. It is called narrow-based, as opposed to broad-based, because only outstanding common stock is used for the formula rather than all common stock on a fully-diluted basis. Narrow-based is more investor friendly than broad-based.