Anti-Dilution Protection
A right held by preferred stockholders that adjusts their conversion price if the company issues shares at a lower price in a subsequent financing round.
Anti-dilution provisions protect early investors from dilution caused by down rounds — financing rounds where the company sells shares at a lower price than prior rounds. The two main types are full ratchet (the most protective for investors — the conversion price adjusts to match the new lower price exactly) and weighted average (more common and more balanced — the adjustment reflects the magnitude of the dilutive issuance, not just its price).
For founders and employees, understanding anti-dilution provisions in the company's preferred stock terms is essential during fundraising. In a significant down round, full ratchet anti-dilution can dramatically reduce the ownership percentage of common stockholders and employees with unvested options. Document intelligence applied to capitalization tables, certificates of incorporation, and investor rights agreements surfaces anti-dilution terms and their implications for any given financing scenario.
More legal Terms
Non-Disclosure Agreement (NDA)
A legally binding contract that establishes confidentiality obligations between parties sharing sensitive information.
Service Level Agreement (SLA)
A contract defining the expected performance standards, uptime guarantees, and remedies for a service provider.
Indemnification
A contractual obligation where one party agrees to compensate the other for specified losses or damages.
Force Majeure
A contract clause that frees parties from obligations when extraordinary events beyond their control prevent performance.
Arbitration
A private dispute resolution process where an independent arbitrator makes a binding decision instead of a court.
Contract
A legally enforceable agreement between two or more parties that creates mutual obligations.
Analyze Documents Related to Anti-Dilution Protection
Upload any document and get AI-powered analysis with verifiable citations.
Start Free