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Anti-dilution provisions are clauses that allow investors the right to maintain their ownership percentages in the event that new shares are issued. Dilution refers to a shareholder's ownership decreasing as a result of new shares being issued.
Equity dilution occurs when a founder's ownership stake is reduced as a result of the issuance of new shares, often following an investment.
Anti-dilution protection is a contract that will protect both the investor and the company. It helps keep investors protected while ensuring that they do not lose their investments if their conversion price is changed.
Weighted average anti-dilution protection works a little differently to a full ratchet. It doesn't claw back everything in the event of a down round: instead, it softens the blow for investors without fully compensating every penny lost.
Anti-dilution provisions are clauses that allow investors the right to maintain their ownership percentages in the event that new shares are issued. Dilution refers to a shareholder's ownership decreasing as a result of new shares being issued.
A typical protection entails the company agreeing by contract to issue additional shares to a particular stockholder to maintain that stockholder's percentage interest in the company until the company raises a specific amount of financing, regardless of the price at which shares are sold that dilute the proposed ...
Very simply, if the original conversion price was $5 and in a later round the conversion price is $2.50, the investor's original conversion price would adjust to $2.50. The weighted average provision uses the following formula to determine new conversion prices: C2 = C1 x (A + B) / (A + C)
Anti-dilution clauses That is, in case shares are issued at a lower price than the price per share that was paid by the existing shareholder. This is achieved by granting such existing investors the right to receive additional shares (referred to here as ?anti-dilution shares'') for free in the course of a down round.