Anti-Dilution
Anti-Dilution is a preferred stock term typically given to venture capital investors that protects the VC investor from a large reduction in ownership of a startup due to the startup’s issuance of additional shares at a price per share lower than what the VC investor previously paid.
The benefit of anti-dilution protection for the VC investor is that the VC investor will receive a conversion adjustment based on the lower-priced issuance of stock in the future.
The amount of the conversion adjustment will depend on what type of anti-dilution protection is used:
-Weighted Average
-Broad-based Weighted Average
-Narrow-Based Weighted Average
-Full Ratchet
About the Author
Ryan Roberts is a startup lawyer and represents technology companies through all phases of the startup process, including incorporation, seed & venture financings, and exit transactions. Click here to learn more about his practice.
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