Anti-Dilution Provision


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."

BREAKING DOWN 'Anti-Dilution Provision'

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

  1. Employee Stock Option - ESO

    A stock option granted to specified employees of a company. ESOs ...
  2. If-Converted Method

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

    Preferred stock that includes an option for the holder to convert ...
  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 ...
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  1. What type of companies use downround financing?

    Down round financing involves selling stock to new investors at a lower price than the investors paid. Shares for the company ... Read Full Answer >>
  2. What is dilutive stock?

    Dilutive stock is any security that dilutes the ownership percentage of current shareholders - that is, any security that ... Read Full Answer >>
  3. 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 ... Read Full Answer >>
  4. Who do hedge funds lend money to?

    Many traditional lenders and banks are failing to provide loans. In their absence, hedge funds have begun to fill the gap. ... Read Full Answer >>
  5. Can mutual funds invest in private equity?

    Mutual funds can invest in private equity indirectly by buying shares of publicly listed private equity companies, such as ... Read Full Answer >>
  6. Can mutual funds invest in options and futures?

    Mutual funds invest in not only stocks and fixed-income securities but also options and futures. There exists a separate ... Read Full Answer >>

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