Anti-Dilution Provision

AAA

DEFINITION of 'Anti-Dilution Provision'

A provision in an option or a convertible security. It protects an investor from dilution resulting from later issues of stock at a lower price than the investor originally paid. Also known as an "anti-dilution clause."

INVESTOPEDIA EXPLAINS 'Anti-Dilution Provision'

These are common with convertible preferred stock, which is a favored form of venture capital investment.

RELATED TERMS
  1. If-Converted Method

    A method used to calculate the share impact of convertible securities ...
  2. Convertible Preferred Stock

    Preferred stock that includes an option for the holder to convert ...
  3. Employee Stock Option - ESO

    A stock option granted to specified employees of a company. ESOs ...
  4. Venture Capital

    Money provided by investors to startup firms and small businesses ...
  5. Convertibles

    Securities, usually bonds or preferred shares, that can be converted ...
  6. Full Ratchet

    An anti-dilution provision that, for any shares of common stock ...
Related Articles
  1. Options & Futures

    A New Approach To Equity Compensation

    The new financial accounting standard known as FAS 123R could take a bite out of your portfolio. Find out why here.
  2. Forex Education

    The Dangers Of Share Dilution

    Investors need to be aware of the existence of dilutive securities and how they can affect existing shareholders.
  3. Investing

    Where does the stock come from when convertible bonds are converted to stock?

    First, let's define convertible bonds. A unique combination of debt and equity, they provide investors with the chance to convert a debt instrument into shares of the issuer's common stock, at ...
  4. Options & Futures

    What is dilutive stock?

    Dilutive stock is any security that dilutes the ownership percentage of current shareholders - that is, any security that does not have some sort of embedded anti-dilution provision. The reason ...
  5. Options & Futures

    What is the difference between arbitrage and hedging?

    Dive into two very important financial concepts: arbitrage and hedging. See how each of these strategies can play a role for savvy investors.
  6. Entrepreneurship

    How can I become a venture capitalist?

    Find out what it takes to become a venture capitalist, and read about some of the primary attributes private equity firms look for in a potential hire.
  7. Entrepreneurship

    How is venture capital regulated by the government?

    Learn about some of the ways in which the U.S. government and the Securities and Exchange Commission regulate venture capital.
  8. Options & Futures

    A Detailed Look Into China's Options Market

    As the Chinese options market gradually takes shape, we provide an overview, including details of the initial phase and building blocks, primary beneficiaries, the impact on the overall financial ...
  9. Options & Futures

    How do you trade put options on E*TRADE?

    Learn all about put option trading at E*TRADE. Explore margin accounts and become familiar with the different types of option writing.
  10. Trading Systems & Software

    How do you trade put options on Ameritrade?

    Learn about option trading with TD Ameritrade. Explore the different types of options and their possible impacts on the investors that write them.

You May Also Like

Hot Definitions
  1. Multiplier Effect

    The expansion of a country's money supply that results from banks being able to lend. The size of the multiplier effect depends ...
  2. Command Economy

    A system where the government, rather than the free market, determines what goods should be produced, how much should be ...
  3. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  4. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  5. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  6. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
Trading Center