# Anti-dilution protection

> Anti-dilution protection — A charter provision that lowers preferred stock's conversion price when the company later sells stock below it. Broad-based weighted average moves it part way, by CP2 = CP1 × (A + B) ÷ (A + C); full ratchet moves it all the way down to the new price.

Source: https://lopifi.com/glossary/anti-dilution-protection
Part of: Lopifi — US GAAP books on autopilot, checked by a CPA (https://lopifi.com)

---

**What is anti-dilution protection?** In accounting, anti-dilution protection means a charter provision that lowers preferred stock's conversion price when the company later sells stock below it. Broad-based weighted average moves it part way, by CP2 = CP1 × (A + B) ÷ (A + C); full ratchet moves it all the way down to the new price.

## Also known as

- Broad-based weighted average
- Full ratchet

## Words this system refuses for it

- pro rata right (buying more)
- dilution itself

- **Category:** Equity & financing
- **Specified in:** [Lexicon](https://lopifi.com/md/docs/domain/11-lexicon)
- **Related:** preferred-stock, dilution