Weighted average ratchet is an anti-dilution protection mechanism whereby the conversion rate of preferred stock is adjusted in order to reduce an investor's loss due to an increase in the number of shares in a company. Without a ratchet, an investor would suffer from a dilution of his or her percentage ownership. Usually as a result of the implementation of a weighted average ratchet, company management and employees who own a fixed amount of common shares suffer significant dilution, but not as badly as in the case of a full ratchet.
Barry Goldsmith
| APA | Barry Goldsmith. (2010). Weighted average ratchet. Retrieved September 28, 2026, from http://smartdefine.org/weighted_average_ratchet/definitions/1166446 |
| Chicago | Barry Goldsmith. 2010. "Weighted average ratchet" http://smartdefine.org/weighted_average_ratchet/definitions/1166446 (accessed September 28, 2026). |
| Harvard | Barry Goldsmith 2010, Weighted average ratchet, Smart Define, viewed 28 September, 2026, <http://smartdefine.org/weighted_average_ratchet/definitions/1166446>. |
| MLA | Barry Goldsmith. "Weighted average ratchet" 21 October 2010. Web. 28 September 2026. <http://smartdefine.org/weighted_average_ratchet/definitions/1166446> |