Anti-Dilution
A protective provision in investment agreements that shields early investors from losing ownership percentage when a company issues new shares at a lower valuation (a 'down round'). Anti-dilution clauses adjust the conversion price of preferred stock to compensate existing investors, with 'full ratchet' and 'weighted average' being the two most common formulas. These provisions are a key negotiation point in venture financing.
Related Terms
The reduction in existing shareholders' ownership percentage that occurs when a company issues new shares, such as durin...
A class of equity ownership that carries preferential rights over common stock, typically including liquidation preferen...
Contractual rights that give preferred stockholders (typically investors) the ability to block certain corporate actions...
A term in preferred stock agreements that determines the order and amount of payouts to investors when a company is sold...
More Finance & Equity Terms
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