What is Antidilutive?

A financial transaction is considered to be antidilutive when the outcome is an increase in earnings per share, either by increasing earnings or reducing the number of shares outstanding. Antidilutive transactions are excluded from the calculation of fully diluted earnings per share.

Antidilutive Examples

For example, an issuer of convertible bonds retires the bonds. This is an antidilutive activity, since the number of potential shares declines. As another example, a company initiates a share buyback program, where it spends $5 million to buy back 100,000 shares from investors. This is an antidilutive activity, because the number of outstanding shares has been reduced.